5. (a) The price of Goldman Sachs stock is currently $142/share and the price expected in one year is $160/share. If you expect Goldman to pay a dividend of $1.40/share in one year, should you buy the stock if your required return (opportunity cost of capital) is 8%? Explain your answer. (Hint: Calculate the expected return).

(b) Pepsicos dividends are currently $1.75/share, and they are expected to grow at a rate of 5% per year. If the required return is 8%, what should the price per share be? (Hint: Use the Gordon growth model). (10 points)