AAA Ltd just paid $2.00 in dividends, and is expected to enjoy a high dividend growth rate of 15% for the next 3 years, and a constant growth rate of 6% for the long term. The discount rate for companies similar to AAA Ltd is 14%. The historical prices for the past 4 years were $25, $20, $30 and $25.

(a) What should be the estimated price for AAAs stock based on the dividend growth model? (estimate to two decimal places) (6 marks)

(b) What is the historical arithmetic mean and standard deviation of AAAs stock price in dollars? (5 marks)

(c) How confident are you of your estimated price in (a), if the distribution of AAAs stock price is assumed to be a normal distribution? (4 marks)