a) Freddie Bamboozle Inc. has an odd dividend policy. The company has just paid a dividend of $8.50 per share and has announced that it will increase the dividend by $5 per share for each of the next four years, and then never pay another dividend. If an investor requires a 12 percent return on the companys stock, how much will an investor pay for a share today (6 marks)

b) Under what circumstances might a firm choose not to pay dividends? (4 marks)