Turbo Technology Computers is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 15% during the next two years, at 13% in the third year, and at a constant rate of 6% thereafter. Turbo’s last dividend was $1.15, and the required rate of return on the stock is 12%.
Complete the following calculations: 1. Calculate the value of the stock today. 2. Calculate P1^ and P2^. 3. Calculate the dividend yield and capital gains yield for Years 1, 2, and 3.