Question: R=10% D 0 = $2 D 1 = D 0 *(1+g) = 2*(1+4%) = $2.08 D 2 = D 0 *(1+g) 2 = 2*(1+4%) 2

R=10%

D0= $2

D1= D0*(1+g) = 2*(1+4%) = $2.08 D2= D0*(1+g)2 = 2*(1+4%)2 = $2.16 D3= D0*(1+g)3 = 2*(1+4%)3 = $2.25

Suppose Bon Temps is expected to experience zero growth during the first 3 years and then resume its steady-state growth of 4% in the fourth year. What would be its value then? What would be its expected dividend and capital gains yields in Year 1? In Year 4?

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