1. Company A just paid a dividend of $2 per share. They anticipate growth of 18% over the next two years, then 13% the following year and then taper off to 6% per year thereafter. If investors require 12% return on their investment in Company A, at what price should the stock sell? Please show work.
2. Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 10 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $6 per share dividend in 11 years and will increase the dividend by 8 percent per year thereafter.
Required: If the required return on this stock is 12 percent, what is the current share price?