7.2

Excel Corporation has recently witnessed a period of depressed earnings performance. As a result, cash dividend payments have been suspended.

i .Investors do not anticipate a resumption of dividends until two years from today, when a yearly dividend of $0.50will be paid.

ii. That yearly dividend is expected to be increased to $1.00in the following year and $1.50 in the year after that.

iii. Beyond the time when the$1.50 dividend is paid, investors expect Excel's dividends to grow at an annual rateof 5 percent into perpetuity. iv.All dividends are assumed to be paid at the end of eachyear. If you require an 18 percent rate of return on Excel's stock, what is the value ofone share of this stock to you today?