You are doing a valuation the stock of Big Taco Inc. a Mexican fast food company. Big Taco just paid an annual dividend of $5.25. You expect the dividend to grow by 15% next year, 10% in the following year, 7.5% for the next 3 years, then 6% and then 5% per year forever.
a. Compute the dividends until the dividend growth is constant.
b. Compute the price of the stock today using the Constant Growth Model assuming a 15% required return.