Problem:
Stock A has an expected dividend of $1.30 payable as of two years from now (i.e. it is not expected to pay any dividends over the first two years). After that, dividends are expected to grow at an annual rate of 1% forever.
Required:
Question: If the discount rate is 5%, what is the value of the stock according to the dividend discount model?
Note: Please show how to work it out.