1) A company is currently paying an annual dividend - $1.00/share. This dividend is expected to grow 20% per year for the next two years, and

then to increase by 4% per year forever. If the required rate of return on an investment in this stock = 8.5% per year, what is your estimate of the current intrinsic (true economic) value of the stock?

2) A company (a different one from the above problem) is currently paying an annual dividend = $1.22/share, and this dividend is expected to

grow forever at an annual rate = 5% per year. If the current price of the stock = $32.03, and assuming the constant dividend growth model is relevant in this case, what, on average, is the investment community's required rate of return on an investment in this stock?