1. Suppose Rome Company earned $10 a share last year and paid dividend of $6 per share. Over the long run, we expect dividends of this company to grow at 8% and we require an 11% return on stock. How much would you pay for the stock based on constant growth DDM?
2. A project promises to return $1,700 next year and $5,000 the year after. The years following, returns are expected to total $5,300, and then $5,618, followed by $5,955, and so forth at this rate indefinitely. What is the long-term growth rate of this project?