3. Home Place Hotels, Inc., is entering into a 3-year remodeling and expansion project. The construction will have a limiting effect on earnings during that time, but when it is complete, it should allow the company to enjoy much-improved growth in earnings and dividends. The company just paid a dividend of $3.40. It expects zero growth in the next year. In years 2 and 3, 5% growth is expected, and in year 4, 15% growth. In year 5 and thereafter, growth should be a constant 10% per year.

a. What are the terminal date and terminal value? [1+2]

b. What is the maximum price per share that an investor who requires a return of 14% should pay for Home Place Hotels common stock? [6]

c. Calculate dividend yield.