FI 306; Kartik Raman; Handout on equity valuation; It is now January 2, 1996. A stock is expected to pay annual dividends forever starting on January 2, 1997, The first dividend is $3 and is expected to grow at a 6% annual rate. Assuming that investors have an expected return of 12%, what is the stock's price on January 2, 1996? a. b. A second stock is also expected to pay annual dividends forever starting on January 2,1997 The first dividend is also expected to be S3. However, between January 2,1997 and January 2, 2001, the growth rate is expected to be 12%. After that the growth rate is expected to be 6%. Investors have an expected return of 12% What will the price of the stock be after it goes ex-dividend on January 2, 2001? c. What is the price of the stock now (January 2, 1996)