Dallas Company just paid a dividend of $2.00 (D0). It expected to increase by 12% per year for the next three years. Growth will slow down to 8% per year for the following three years, and finally slow to a 5% per year thereafter. Your required rate of return is 25%, how much you are willing to pay for this stock?What is the expected return of the economy?

Economic Conditions

• Strong economy, no inflation (Probability: 0.31, Rate of Return: 20%)
• Weak economy, above average inflation (Probability: 0.29, Rate of return: -5%)
• No major change in economy (Probability: 0.4, rate of return: 10%)

What is the standard deviation of the expected return?