ANSWERS 135 1) $25 (PVIFA of 10%,10 years) +$150(PV10%,10 years )=$25 6.1446+$1500.38554=153.615+57.831=$211.446 P) Premium (a) 0.09$2=$22.22 (b),0.090.02$2=$28.57. 0.090.05$2=$50 85 dividend ( 5% growth, required rate of return 9% ) = 0.090.05$5=$125 i dividend (7% growth, required rate of return 11%)= 2.110.07$5=$125 There would not be any change. dividend (10\% growth for 4 years, 7% thereafter) D1=$61.10=$6.60D2=$6.601.10=$7.26D3=$7.261.10=$7.98D4=$7.981.10=$8.78P4=(K3g)D4(1+g)=0.1093946=$93.94 atueofstock====(PVofD1)+(PVofD2)+(PofD3)+(PofD4)+(PofP1)6.60(0.855)+7.26(0.731)+7.98(0.624)+8.78(0.534)+93.94(0.534)5.643+5.307+4.979+4.689+50.164$70.78 dividend (no growth for 5 years, 11% thereafter)