A company does not plan to pay dividends until 3 years from now. At the end of the third year, the company will pay a $2.50 dividend (i.e. D4=2.50). From that point on, dividends will increase by 3% per year indefinitely. The required return on the stock is 9%.

a.What is the stock price in three years? What are dividend yield and capital gains yield in three years?

b. What is the stock price today? What are dividend yield and capital gains yield today?

c.What is the stock price in 10 years? What are dividend yield and capital gains yield in 10 years?