Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm expects to grow at 20% per year for three years. By then, other firms will have the copycat technology, and the competition will drive down profit margins. Starting from year 4, the firm will have a sustainable growth rate as 4.8%. In addition, EPS in year 4 is expected to be $5 and will pay out 60% as dividends in year 4 and after that. Given the most recent annual dividend that paid out yesterday was DIV0 = $1 per share and the market rate of return is 10%.

a. Please calculate the DIV1, DIV2, DIV3, and DIV4, respectively? (5 points)

b. What is the stock price today? (10 points)

c. What will the next year's stock price, P1, be? (10 points)

d. What is the expected rate of return to an investor who buys the stock now and sells it in 1 year? (5 points) Hint: rate of return on the stock =(P1 - P0 + Annual Dividends) / P0