Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 15% per year.
a. If r = 20% and DIV1 = $7, what is the price of a share? (Do not round intermediate calculations.)
b. What price do you forecast for the stock one year from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. What is the cost of capital on the stock? (Do not round intermediate calculations.)