ABC is a profitable firm not paying a dividend on its common stock. Frank, a analyst believes the ABC will begin paying a $3.00 per share dividend in two yrs and that the dividend will increase 4% annually thereafter. Kent, a colleague of Frank at the same firm is less optimistic. Brett thinks the ABC company will begin paying a divident in 4 yrs and it will be $2.50 and it will grow at a rate of 3% annually. John and James agree that the required return for ABC is 11%.
a. what value would Frank estimate for the firm
b. what value will Kent assign to ABC stock