Question: 1. Alfonso Ltd will not pay dividends until year 3, whereby it is expected to pay $5 in dividends. Dividends are then expected to grow

1. Alfonso Ltd will not pay dividends until year 3, whereby it is expected to pay $5 in dividends. Dividends are then expected to grow at 20%, 10% and 5% in years 4, 5 and 6. Afterwards, dividend growth will stabilize to 2% consistently. If the rate of return is 10%, determine the stock price in year 3.

2. Gurkarant is planning on paying annual dividends of $1.20, $1.35, and $1.50 over the next 3 years, respectively. After that, Gurkarant's plans to pay a constant dividend of $1.75 per share each year. To compute the value of Gurkarants's stock today, you should first determine the value of the stock at the end of year. Calculate the value of the stock.

3. Which companies are likely to estimate the supernormal dividend growth?

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