1. XYZ Corporation expects dividends to grow at a rate of 15% per year for 3 years. After 3 years, dividends are expected to grow at only 2% per year indefinitely into the future. The most recent dividend paid was $5. The market requires a 10% rate of return on stocks similar in risk to XYZ. Calculate P3, the stock price expected at the end of year 3.

2. How much are you willing to pay for one share of LBM stock if the company just paid an annual dividend of $2.24, the dividends increase by 2.3 percent annually, and you require a return of 14.8 percent?

3. What is your expected return on a $62 stock that just paid a $4 dividend and is expected to grow at 3.4% forever?