1. Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years. ? After that, dividends will increase at a rate of 5% per year indefinitely. ? If the last dividend was $1 and the required return is 20%, what is the price of the stock?
2. You have $22,950.42 in a brokerage account, and you plan to deposit an additional $2,500 at the end of every year until your account totals $200,000. You expect to earn 10.2 percent annually on the account. How long will it take to reach your goal?