Question: AMAZING.com is a highly priced tech stock whose earnings in the coming year (Et) are expected to be $0.50 per share. Investors expect these earnings

AMAZING.com is a highly priced tech stock whose earnings in the coming year (Et) are expected to be $0.50 per share. Investors expect these earnings to grow at 100% (g) per year for 4 years. This growth rate is estimated by assuming that AMAZING reinvests all earnings (b=1) at a return (R) of 100% per year. After 4 years of this high growth, competition is expected to sharply reduce the profitability of AMAZING.com. Consequently, the forecast is that company will then retain only 50% of its earnings and invest them at a return of 25% per year. The remaining 50% of earnings will be paid out as dividends to stockholders. Investors in AMAZING.com require a return (k) of 20% per year: 1. What is the price per share of the AMAZING.com? 2. What is the premium for growth of the stock? 3. What is AMAZING.com's PE ratio? 4. Suppose the company announces it will pay a small dividend in each of the next 4 years of $0.25 per share, what change if any would this announcement have on the price of the stock?

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