AAA, Inc. has never paid a dividend, and there are no plans to pay dividends during

the next three years. But, in four years $-$ that is$,$ at the end of year $4-$ the company

expects to start paying a dividend equal to $$2\mathrm{.}00$ per share. The same dividend will

be paid for the remainder of AAA's existence. If investors require an $8$ percent rate

of return to purchase the company's common stock, what should be the market

value of AAA's stock today according to the DDM$?$

Your broker offers to sell you some shares of BBB$,$ Inc., which paid a dividend of

$$1\mathrm{.}20$ yesterday. You expect the dividend to grow at a rate of $3$ percent per year

into perpetuity. The appropriate rate of return for the stock is $7$ percent. What is

the value of BBB stock?

Cool & Decent, Inc. $($NYSE: CD$)$ has never paid a dividend. However, the company

plans to start paying dividends in two years $-$ that is$,$ at the end of Year $2.$ The first

dividend is expected to equal $$1\mathrm{.}50$ per share. The second dividend and every

dividend thereafter are expected to grow at a $4$ percent rate. If investors require a $9$

percent rate of return to purchase CD$\text{'}$s common stock, what should be the market

value of its stock today according to the DDM$?$

You are analyzing the stock of Stubborn Hardware, Inc. $($NasdaqGS: SH$).$ The current

market price of $SH$ is $$53\mathrm{.}55.$ The company's dividend per share for the last fiscal

year was $$1\mathrm{.}50.$ You expect the dividend to increase by $7$ percent for the next three

years and then increase by $3$ percent per year forever. You estimate the required

return on equity of $SH$ to be $9$ percent. Estimate the value of SH stock using a two$-$

stage dividend discount model.