1. Compute the present value of an annuity of $ 795 per year for 25 years, given a discount rate of 8 percent per annum. Assume that the first cash flow will occur one year from today (that is, at t = 1).
2. Compute the value of a share of common stock of a company whose most recent dividend was $1.50 and is expected to grow at 8 percent per year for the next 2 years, after which the dividend growth rate will decrease to 4 percent per year indefinitely. Assume a 10 percent required rate of return.