Question: PROBLEM 3 (20 POINTS) Assume that McGill Inc. is expected to experience supernormal growth of 25 percent for the next 2 years, followed by 15

PROBLEM 3 (20 POINTS) Assume that McGill Inc. is
PROBLEM 3 (20 POINTS) Assume that McGill Inc. is expected to experience supernormal growth of 25 percent for the next 2 years, followed by 15 percent for the year after, and then to return to its long-run constant growth rate of 4 percent. McGill Inc. most recent dividend was $1.25. The investor's required rate of return is 11%. (a) Calculate the current price of the stock. (10 POINTS) (b) What is the expected dividend yield and capital gains yield in Year 1? (5 POINTS) (c) What is the expected dividend yield and capital gains yield in Year 4? (5 POINTS)

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