AC Technology Company (ACT) is expected to have a 15 percent growth rate of dividend for the next four years. Beginning in year five, the growth rate of dividends is expected to drop to 9 percent per year and last indefinitely. ACT just paid a $5.00 dividend and the appropriate discount rate (e.g., required rate of return on the stock) is 12 percent. Suppose you plan on purchasing one share of ACT in year two, right after the dividend is paid at the end of the year. You then plan on selling your share of ACT at the end of year seven, right after the dividend is paid at the end of the year. In year two, ACTs share price is equal to the intrinsic value of the ACT share at the end of year two. In year seven, ACTs share price is equal to $ 411.47.

What is the capital gain (or loss) rate that you will receive on your investment?

What is the ACT equity securitys total return?

Calculate and show how the price in year seven was calculated to reach the intrinsic value of $411.47 (intrinsic value).