E-Eyes.com Bank just issued some stock. Once dividends begin, they will be annual and continue forever at $17 per year. The first annual dividend is expected to be paid in 10 years from now. If the expected return on the stock is 10 percent, the price of a share is $ today.
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 9 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $12 per share dividend in 10 years and will increase the dividend by 5 percent per year thereafter. If the expected return on this stock is 12 percent, the current share price is $