Problem 1. Harrison Clothiers' stock currently sells for $20 a share. It just paid a dividend of $1.00 a share (that is D0 = $1.00). The dividend is expected to grow at a constant rate of 6 percent a year. What stock price is expected 1 year from now? What is the required rate of return?
Problem 2. A stock is expected to pay a dividend of $0.50 at the end of the year (that is, D1 = 0.50), and it should continue to grow at a constant rate of 7 percent a year. If its required return is 12 percent, what is the stock's expected price 4 years from today?