1. ABC Corp. is a mature company that pays an annual dividend. Three months ago, the firm paid a dividend of $2 per share and the next dividend will be paid 9 months (0.75 years) from today. Investors expect the annual dividend to grow at 5% per year, permanently. The required return on the stock is 10%. What should the price of the stock be today?
2. Ten years ago, Lucas Inc. earned $0.50 per share. It’s earnings this year were $3.60. What was the growth rate in the earnings per share (EPS) over the 10-year period ?