4-25 A company recently announced an increase of their quarterly dividend from

$.05 to $.06 per share. This continued a long string of double digit percentage

increases in dividends. Suppose you want to use the dividend growth model to

value this firm's stock. You believe that dividends will keep growing at a 10%

per year indefinitely, and you think the market's requiredreturnon this stock is 11%. Let's assume that the firm pays dividends annually and that the next dividend is expected to be $.23 per share. The dividend will arrive in exactly one year. What would you pay for the stock right now? Suppose you buy the stock today, hold it just long enoughto receive the next dividend, and then sell it. What rate of return will you earn on that investment?

4-28 Suppose that today's date is March 30, 2010, and that the stock of E-Pay, Inc., pays a dividend every year on March 29. The most recent dividends was $1.50 per share. You expect the company's dividends to increase at a rate of 25% per year through March 29, 2013. After that, dividends will probably increase at 5% per year. Investors require a 14% return on E-Pay stock. Calculate the price of the stock on the following dates: March 30, 2010, September 30, 2011, and March 30, 2014. Below is what I have so far but I know I'm doing it wrong.