$2.$ As an analyst at Churnem & Burnem Securities, you are responsible for

making recommendations to your firm$$s clients regarding common stocks.

After gathering data on Denver Semiconductors, you have found that its

dividend has been growing at a rate of $5\%$ per year to the current $($D$0)$

$$0\mathrm{.}60$ per share. The stock is now selling for $$20$ per share, and you

believe that an appropriate rate of return for this stock is $9\%$ per year.

a$.$ If you expect that the dividend will grow at a $5\%$ rate into the

foreseeable future, what is the highest price at which you would

recommend purchasing this stock to your clients?

b$.$ Suppose now that you believe that the company$$s new product line

will cause much higher growth in the near future. Your new estimate

is for a three$-$year period of $15\%$ annual growth to be followed by a

return to the historical $5\%$ growth rate. Under these new assumptions,

what is the value using the two$-$stage dividend growth model?

c$.$ You now realize that it is likely that the growth will transition from

$15\%$ down to $5\%$ gradually, rather than instantaneously. If you believe

that the transition will take five years, what is the value of the stock?

Use the three$-$stage and H$-$Model valuation methods.

d$.$ For each of the answers from above, create an IF statement that shows

whether the stock is undervalued, overvalued, or fairly valued