Assume that Bon Temps is a constant growth company whose last dividend (D₀, which was paid yesterday) was $2 and whose dividend is expected to grow indefinitely at a 6% rate. The appropriate rate of return for Bon Temps stock is 16%.

What is the firms expected dividend stream over the next 3 years?

What is the firms current stock price?

What is the stocks expected value one year from now?

What are the expected dividend yield, the capital gains yield, and the total return during the first year?

Assume that Bon Temps stock is currently selling at $21.20. What is the expected rate of return on the stock?

What would the stock price be if its dividends were expected to have zero growth?

Assume that Bon Temps is expected to experience supernormal growth of 30% for the next 3 years, then to return to its long-run constant growth rate of 6%. What is the stocks value under these conditions? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4?

Suppose Bon Temps is expected to experience zero growth during the first three years and then to resume its steady-state growth of 6% in the fourth year. What is the stocks value now? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4?

Assume that Bon Temps earnings and dividends are expected to decline by a constant 6% per yearthat is, g = 26%. Why might someone be willing to buy such a stock, and at what price should it sell? What would be the dividend yield and capital gains yield in each year?