1. Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 36% per year - during Years 4 and 5, but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 18%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.

2. Nick's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Nick produced seven fire engines, but he has decided to increase production to eight fire engines. The following graph shows the demand curve Nick faces. As you can see, to sell the additional engine, Nick must lower his price from $100,000 to $50,000 per fire engine. Note that while Nick gains revenue from the additional engine he sells, he also loses revenue from the initial seven engines because he sells them all at the lower price.

250 225 Revenue Lost 200 175 150 Revenue Gained PRICE (Thousands of dollars per fire engine) 125 Demand 100 75 50 25 0 0 1 2 8 10 7 QUANTITY (Fire engines) Nick increase production from 7 to 8 fire engines because the dominates in this scenario. True or False: If Nick's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in the same change in the production quantity and, thus, total revenue. True False