Question 1) Storico Co. just paid a dividend of $3.50 per share. The company will increase its dividend by 12 percent next year and will then reduce its dividend growth rate by 3 percentage points per year until it reaches the industry average of 3 percent dividend growth, after which the company will keep a constant growth rate, forever. If the required return on Storico stock is 12 percent, a share of stock will sell for $_____ today.
Question 2) Storico Co. just paid a dividend of $6.50 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate, forever. If the required return on Storico stock is 21 percent, a share of stock will sell for $____ today.