4. You have been researching a company that is actively involved in the renewable energy business....

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4. You have been researching a company that is actively involved in the renewable energy business. As you dig a little deeper you discover that it has filed a patent for a new technology that integrates solar energy collection into asphalt roofing material. With this in mind you estimate that the firm will experience extraordinary growth of 70% per year for two years, and another three years of unusual growth at 30% per year. After this five year period you feel competition will cause the firms growth rate to fall to its previous growth pattern of 7% per year. Answer the following questions assuming the firm just paid a dividend of $0.50 per share and has a beta of 1.7. Also assume that the risk-free rate is 3% and the return on the market portfolio is 10%. a. What is the required return on this stock? b. How much would you be willing to pay for the stock? 4. You have been researching a company that is actively involved in the renewable energy business. As you dig a little deeper you discover that it has filed a patent for a new technology that integrates solar energy collection into asphalt roofing material. With this in mind you estimate that the firm will experience extraordinary growth of 70% per year for two years, and another three years of unusual growth at 30% per year. After this five year period you feel competition will cause the firms growth rate to fall to its previous growth pattern of 7% per year. Answer the following questions assuming the firm just paid a dividend of $0.50 per share and has a beta of 1.7. Also assume that the risk-free rate is 3% and the return on the market portfolio is 10%. a. What is the required return on this stock? b. How much would you be willing to pay for the stock?