An analyst is estimating the intrinsic value of the stock of Yipee Inc. The analyst estimates that the stock will pay a dividend of $1.75 a share at the end of the year (that is, D = $1.75). The

dividend is expected to remain at this level until 4 years from now (that is, D = D = D = 234

$1.75). After this time, the dividend is expected to grow forever at a constant rate of 6 percent a year (that is, D = $1.855). The stock has a required rate of return of 13 percent.

1. What is the stocks intrinsic value today?

   (4 marks)

2. Assume that the forecasted dividends and the required return are the same one year from now, as those forecasted today. What is the expected intrinsic value of the stock one year from now, just after the dividend has been paid at t = 1?

   (3 marks)

3. What is the difference among the three forms of the efficient market hypothesis? (3 marks)