A financial analyst estimates that the current risk-free rate for NN company is 6.25 %, the market risk premium is 5 %, and NNs beta is 1.75. The current earnings per share (EPS₀) is $2.50. The company has a 40 % payout ratio. The analyst estimates that the companys dividend will grow at a rate of 25 % this year, 20 & next year, and 15 % the following year. After three years the dividend is expected to grow at a constant rate of 7% a year. The company is expected to maintain its current payout ratio. The analyst believes that the stock is fairly priced.

1. What is the required rate of return for the stock?
2. What are the dividends for 4 years?
3. What is the stock price at the end of year 3 ?
4. What is the current price of the stock?