12. (Two-stage growth) It is common practice in security analysis to modify the basic div- idend growth model by allowing more than one stage of growth, with the growth factors being different in the different stages As an example consider company Z, which currently distributes dividends of $10M annually. The dividends are expected to grow at the rate of 10% for the next 5 years and at a rate of 5% thereafter.

(a) Using a dividend discount approach with an interest rate of 15%, what is the value of the company?

(b) Find a general formula for the value of a company satisfying a two-stage growth model Assume a growth rate of G for k years, followed by a growth rate of g thereafter, and an initial dividend of D