Explanation:

The intrinsic value of the stock is calculated using the Gordon growth model:

$V_0 = \frac{D_1}{r - g}$

Where:

• D_1 = D_0 \times (1 + g) = \`1.00 \times 1.048 = \$1.04`8$
• $g = \text{ROE} \times \text{Retention rate} = 0.12 \times (1 - 0.60) = 0.048$
• $r = 10\%$ (required rate of return)

Substituting the values:

V_0 = \frac{\`$1.04`8}{0.10 - 0.048} = \frac{\`$1.04`8}{0.052} \approx \`$20.15`

Why other options are incorrect:

• A: Incorrectly uses ROE (12%) instead of the required rate of return (10%).
• B: Incorrectly uses $D_0$ instead of $D_1$.