Question 1:
ABC Inc. has an expected yield of 18% . It anticipates paying the same dividend of $1.10 for four more years, after which the dividend will grow at 7% a year indefinitely. Based on the dividend valuation (Capitalization) model, at what price should ABC Inc. currently sell?
Question 2:
Net Ltd. just paid a dividend of $1.80 which it expects to be $2.90 next year and $4.00 the next year. After that time, the dividend will likely decline to 5% per year forever. With required rates of return at 14%, what should investors pay for Net Ltd?