a. XYZ Corporation has been growing at a rate of 20% per year. The growth is expected for another two years and then decline to 6%. If XYZ D0=$1.60 and required rate of return is 10% what is XYZ stock worth today? What is the expected dividend and capital gains yield at year 1? Year 2?

b. Say XYZ supernormal growth is expected to last for 5 years rater than 2 years. How would this affect the price of the stock, dividend yield and capital gains yield? Discuss.

c. What will be the dividends and capital gains yield once the supernormal growth rate ends?