1. Dividend Growth Model and Stock Prices

Altria stock (Ticker symbol MO, earlier called Phillip Morris) trades at a price of $47. Its next annual dividend will be $3.6 and it has an expected growth of 5% a year.

1. Assuming a required return of 10% on MO stock, what should the price of MO be today?

2. What growth rate in dividends rationalizes the current price of $47? In other words, what growth rate gives the market price given the required return of 10%?