Can you answer Quantitative Problem 3: Assume today is December 31, 2019. Imagine Works Inc. just paid a dividend of $1.40 per share at the end of 2019. The dividend is expected to grow at 18% per year for 3 years, after which time it is expected to grow at a constant rate of 6% annually. The company's cost of equity (rs) is 9.5%. Using the dividend growth model (allowing for nonconstant growth), what should be the price of the company's stock today (December 31, 2019)? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share

Market equilibrium occurs when the stock's price is its intrinsic value. If the stock market is reasonably efficient, differences between the stock price and intrinsic value should not be very large and they should not persist for very long. When investing in common stocks, an investor's goal is to purchase stocks that are undervalued (the price is the stock's intrinsic value) and avoid stocks that are overvalued. The value of a stock today can be calculated as the present value of stream of dividends: Valueofstock=P0=(1+rs)1D1+(1+rs)2D2++(1+rs)0D=t=1(1+rs)tDt 1. Constant Growth Stocks; 2. Zero Growth Stocks; 3. Nonconstant Growth Stocks. Constant Growth Stocks: For many companies it is reasonable to predict that dividends will grow at a constant rate, so we can rewrite the generalized model as follows: P0=(1+rg)1D0(1+g)1+(1+rg)2D0(1+g)2++(1+rs)D0(1+g)=rsgD0(1+g)=rsgD1 remain constant in the future. This condition almost never holds for firms, but it does exist for many companies. Which of the following assumptions would cause the constant growth stock valuation model to be invalid? a. The growth rate is zero. b. The growth rate is negative. c. The required rate of return is greater than the growth rate. d. The required rate of return is more than 50%. e. None of the above assumptions would invalidate the model. current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share Zero Growth Stocks: P0=IaD payments in perpetuity. The valuation equation is simply the current dividend divided by the required rate of return. the preferred stock, what is the price of the firm's perpetual preferred stock? Round your answer to the nearest cent. $ per share Show All Feedback Nonconstant Growth Stocks: the cycle. For valuing these firms, the generalized valuation and the constant growth equations are combined to arrive at the nonconstant growth valuation equation: P0=(1+rs)1D1+(1+rs)2D2++(1+rg)NDN+(1+ra)NP^N date of all dividends expected thereafter. should be the price of the company's stock today (December 31, 2019)? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share