Find the value of stock that just paid a dividend D₀ and will grow at a rate g₁ for the next two years (it could be three years if you want) and then will grow forever at a rate g₂. The cost of equity of the stock is k (Remember k must be greater than g₂).

As I said in class, make up your own numbers for D₀, g₁, g₂ and k (again k>g₂). This exercise is for you to practice the two-stage model.