Answer the following questions and show your working. [20 marks] a) Phillips Co. is experiencing rapid growth. Dividends are expected to grow at a rate of 30 percent during the next three years, 18 percent over the following year, and then 8 percent per year indefinitely. If the required return is 11 percent and the company just paid a dividend of $0.97, what is the current share price? [10 marks] Some useful equations: . The PV of a perpetuity of C dollars received starting at t = 1 is PV = C . The PV of a growing perpetuity is PV = , . The PV of an annuity of C dollars received for T periods is PV = $ 1 -(1+7)7] . The PV of a growing annuity is PV = ," (1+8) ( Itr)] b) Suppose that Intel is currently selling at $20 per share. You believe that the stock price of Intel will increase. So you buy 1,000 shares using $15,000 of your own money, borrowing the remainder ($5,000) of the purchase price from your broker. The rate on the margin loan is 8%. [10 marks] i. What is the rate of return on your margin position (assuming again that you invest $15,000 of your own money) if Intel is selling after 1 year at: $22 and $18? [6 marks] ii. Continue to assume that a year has passed. If the maintenance margin is 25%, how low can Intel's price fall before you get a margin call? [4 marks]