Use the same facts as in second question that iposted except the 5% income growth rate (and beginning of year common equity to support it) is only expected for years 2 and 3. Then growth is expected to be zero and all income is expected to be distributed to shareholders for all future years.a Compute the dividend payment for the next three years, and then dividends for all future years. b Use the dividend discount (i.e. free cash flow to equity investors) valuation model to estimate the companys current stock price.

THIS IS THE QUESTION 9 WHICH WILL BE USED IN THIS QUESTION

Use the same facts as in Question 8, but assume you expect the companys income to be $2000 in the coming year and to grow at the rate of 5% in every subsequent year into infinity. Also, assume that the companys common equity as of the end of the most recent fiscal year is $12 000, and the investment needed to support the growth in net income causes shareholders equity to increase by 5% each year. Assume the company is an all-equity firm; that is, all financing comes from stockholders and none comes from debtholders. In this case, the companys balance sheet has net operating assets (NOA) of $12 000, shareholders equity of $12 000, and zero net financial obligations (zero net debt). a Compute dividends (or free cash flow to equity holders) for the coming year and the rate of growth in dividends for every year thereafter. b Use the dividend discount (i.e. free cash flow to equity investors) valuation model to estimate the companys current stock price.