Company Z$-$prime's earnings and dividends per share will grow by $4\%$ a year. Its growth will

stop after year $4.$ It will pay out all earnings as dividends in year $5$ and afterward.

a$.$ Assume next year's dividend is $$6,$ the cost of equity is $8\%,$ and next year's earnings per

share $($EPS$)$ is $$13.$ What is Z$-$prime's stock price?

b$.$ Assume that the growth in earnings and dividends after year $4$ will be $2\%.$ What would be Z$-$

prime's stock price in this case?

c$.$ In a short statement, describe why the stock price is sensitive to the growth change

assumption after year $4?$