A firm will pay dividends of $0.40, $0.60, $0.75, and $1.00 per share over the next four years, respectively. Then dividends will grow constantly forever. Stock price should be

1. $9.89 if g= 3.5% and k = 13.5%

2. $11.50 if g= 3.5% and k = 10.5%

3. $7.55 if g= 2.5% and k = 13.5%

4. $9.23 if g= 2.5% and k = 10.5%

In the FCF model, the discount rate k should be calculated based on

1. assets beta

2. equity beta

3. expected dividends

4. the residual income