1. Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.00 coming 3 years from today. The dividend should grow rapidlyat a rate of 21% per yearduring Years 4 and 5, but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 12%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.
2. Carnes Cosmetics Co.'s stock price is $44, and it recently paid a $1.25 dividend. This dividend is expected to grow by 16% for the next 3 years, then grow forever at a constant rate, g; and r_s = 16%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places.