1. A fast growing firm recently paid a dividend of $0.55 per share. The dividend is expected to increase at a 22 percent rate for the next three years. Afterwards, a more stable 11 percent growth rate can be assumed. If a 13 percent discount rate is appropriate for this stock, what is its value?
2. Value a Constant Growth Stock Financial analysts forecast Limited Brands’ (LTD) growth rate for the future to be 11 percent. LTD’s recent dividend was $0.80. What is the value of Limited Brands’ stock when the required return is 13 percent?