Final answer:
To find the expected stock price of Washington Industries one year from now, use the formula P0 *(1+g), where P0 is the current stock price and g is the growth rate. The expected price, with P0 = $60 and g = 6.9%, is $64.14. The correct option is e. $64.14
Step-by-step explanation:
The question deals with the expected stock price one year from now, given a current price, a recent dividend, and a constant growth rate.
To find this, we can use the Gordon Growth Model (also known as the Dividend Discount Model) which calculates the value of a stock based on its dividends that grow at a constant rate.
Specifically, the formula to find the expected stock price one year from now (P1) is P0 *(1+g), where P0 is the current stock price and g is the growth rate.
Using the given figures: P0 = $60, D0 = $2.64, and g = 6.9%, the expected stock price one year from now would be calculated as follows:
P1 = $60 * (1 + 0.069) = $60 * 1.069 = $64.14.
Therefore, the expected stock price of Washington Industries one year from now is $64.14. The correct option is e. $64.14