An analyst is estimating the intrinsic value of the stock of Xavier Company. The analyst estimates that the stock will pay a dividend of $1.75 a share at the end of the year (that is, = $1.75). The dividend is expected to remain at this level until 4 years from now (that is, = = = $1.75). After this time, the dividend is expected to grow forever at a constant rate of 6% a year (that is, = $1.855). The stock has a required rate of return of 13%.
Required: What is the expected intrinsic value of the stock one year from now, just after the dividend has been paid at t = 1? (That is, what is p^1 ?) (I mean ^ on top of p)