Question: A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant rate of 1.5 percent over the last 15 years and you expect this to continue.
a. If the required rate of return on the stock is 12 percent, what is its fair present value?
b. If the required rate of return on the stock is 15 percent, what is its expected price four years from today?