A common stock has just paid a dividend of $1.82/share. The dividend is expected to stay constant for the next 20 years. After that, the dividends are expected to grow by 3.68% per year in perpetuity. The RRR on the stock is 13.82%. What is the value of the stock today?

A limited life company that plans to operate a 30-year project is expected to pay whats described as liquidating dividends (pay same amount of dollars each year for 30 years before it seizes to exist). The annual dividend is estimated at $12.50/share. If the required rate of return on this company is 15%, how much would a prospective investor be willing to pay for each share of this company?

Starting with the fact that the $2,866.05 in question 2 is actually the $2,000 in question 1 grown at the 4.6% growth rate for eight years, reflect on the previous three problems and try to find the commonalities and any relationship among them. Now take the answers to the first two and compare them to the answer of the third. Can you see how they relate to one another? Can you explain why?