Assume ABC Co. intends to pay a $3.50 dividend per share next year, a $3.70 dividend per share in 2 years and then that dividends will increase steadily by 4% after that. Further assume the required rate of return on equity capital of ABC stock is 8%. Using the dividends valuation approach, what is the value of ABCs stocks? [all calculations must be explained, a correct result without explanations will not generate any points] (12 points)

If ABCs stock is trading at $90 per share. If you were a sell-side financial analyst, what would you recommend to your clients? Why? (3 points)