Final answer:
Using the Gordon Growth Model, the estimated selling price of the stock with a $2.00 dividend expected to grow at 6% indefinitely and a required return of 13% is $30.29.
Step-by-step explanation:
To determine the estimated selling price of a stock that just paid a $2.00 dividend, which is anticipated to grow at 6% indefinitely, and where similar stocks are returning about 13%, we use the Gordon Growth Model (also known as the Dividend Discount Model). The formula for this model is P = D1 / (r - g), where P is the price of the stock, D1 is the expected dividend next year, r is the required rate of return, and g is the growth rate in dividends.
Applying this formula with the given values ($2.00 dividend, 6% growth rate, 13% required rate of return), the estimated selling price of the stock is calculated as follows:
P = $2.00 * (1 + 0.06) / (0.13 - 0.06) = $2.12 / 0.07 = $30.29.
Therefore, the correct answer is a. $30.29.