Question: Scotts Dairy stock sells for $20 per share, and the most recent dividend was $1. An analyst using the three-stage growth model estimated that the high growth rate of 10% will only last for 2 years before it declines to a constant long-run normal growth rate of 7% over a three-year transition period.
using the h-model:
a. what is the present value of the expected dividends for Scotts Dairy?
b. what is the expected return?
c. what is the alpha?