Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next five years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%. i. Calculate the dividends for years 1, 2, and 3. (3 Marks)

ii. What is the price of the stock in year 5? (3 Marks)

iii. Calculate the present value today of dividends for years 1 to 5. (3 Marks)

iv. What is the price of the stock today (P0)? (3 Marks)