A rapidly growing firm is currently paying a dividend of $$2\mathrm{.}95.$ The dividend growth rate is expected to be $8\%$ for the next $3$ years, $6\%$ for the following $2$ years, and $4\%$ annually thereafter. The expected return on the market is $10\%,$ the risk$-$free rate is $5\%$ and the firm's Beta is $1\mathrm{.}20.$

MULTIPLE GROWTH RATE SCENARIOS

EXERCISE $6$ CHAPTER $3$

a$.$ Calculate the estimated price $($intrinsic value$)$ for a share of this firm's stock.

b$.$ Use Goal Seek to determine what the current dividend would need to be to yield an estimated price $($intrinsic value$)$ of $$70.$