1. ABC Company's last dividend was $1.4. The dividend growth rate is expected to be constant at 29% for 2 years, after which dividends are expected to grow at a rate of 6% forever. The firm's required return (rs) is 13%. What is its current stock price (i.e. solve for Po)?
2. ABC just paid a dividend of D0 = $2.1. Analysts expect the company's dividend to grow by 30% this year, by 20% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this stock is 17%. What is the best estimate of the stock’s current market value?