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.

3. Find present value of stock = Value during supernormal growth period + Value during normal growth period (2 marks)