1. Non-Constant growth stock Valuation Stewart Industries just paid a $3.00 per share dividend on its common stock yesterday (i.e., D0 = $3.00). The dividend is expected to grow 20 percent a year for the next four years, after which time the dividend is expected to grow at a constant rate of 5 percent a year for ever. You assume a 14 percent discount rate.
a) What is the price of stock at the end of the year 4
b) What should be the price stock today