A stock you are evaluating is expected to experience supernormal growth in dividends of 10 percent, gs , over the next five years. Following this period, dividends are expected to grow at a constant rate of 4 percent, g. The stock paid a dividend of $4 last year, and the required rate of return on the stock is 15 percent.

2.Find the present value of dividends after the period of supernormal growth.

a. Find stock value at beginning of constant growth period (5 marks) b. Find present value of constant growth dividends (3 marks)