Company TYK pays dividends annually, with next years dividend expected to be $1 a share. For the next seven years, dividends are expected to grow at a rate of 6% a year. Thereafter, dividends are expected to remain constant.

A. What is the dividend per share in year 7?

B. Assume the discount rate is 5%. How much would you pay for one share in Company TYK?

QUESTION 2

Re-calculate your answer to part b of the previous question, assuming that grows at a rate of 5% for the first seven years, rather than at a rate of 6%.

Please answer Question 2.