1.Unicorn Inc. is expected to grow by 20% p.a. for the next two years and then grow by 8% p.a. thereafter. The company currently pays an annual dividend of $1.50/share and is expected to maintain a constant payoutratio.

(i)Using the appropriate dividend discount model and assuming investors require a 15% p.a. rate of return, what is the per share value of Unicorn, Inc.? (12points)

(ii)Among a) the initial growth rate, b) the terminal growth rate, and c) the market's required rate of return, which of these three inputs has the most impact on your calculation. In other words, to which of these three inputs is the price of the stock most sensitive [Hint: separately change each assumption by 1% in order to raise thestock'sprice and determine its percentage impact on the estimated price of the shares.] (10points)