Hare Inc is a worldwide delivery company that is expected to generate a dividend (per share) of $2.50 one year from now (i.e. at t=1). You are expecting that on average Hare Inc's dividends will grow at 7% each year after that into the indefinite future. Assume for simplicity that all dividends are paid at the end of each year. Suppose that the appropriate discount rate for these dividends is 15%.

A. What is the current stock price for Hare Inc? Assume that any dividend at t=0 has already been paid out?

B. What do you expect the stock price of Hare to be at the end of second year (i.e. at t=2) immediately after the dividend has been paid out?

C. What is the expected return for holding the stock of Hare over the year ahead?

Hint: First, compute the stock price at t=1. Then, find the IRR on the expected cash flows from buying the stock at t=0 and selling the stock at t=1. At t=1, the cash flows should include the stock price as well as the dividend you will receive?

D. What is the current stock price for Tortoise Inc? Assume that any dividend at t=0 has already been paid out.

E. What do you expect the stock price of Tortoise to be at the end of second year (i.e. at t=2) immediately after the dividend has been paid out?

F. What is the expected return for holding the stock of Tortoise over the year ahead?

G. A friend of yours claims that Hare Inc is a better investment because it is expected to grow faster than Tortoise Inc. Is your friend correct? Assume that both stocks are equally risky?Give the intuition for your answer in one or two sentences.

H. Would your answer to g) change if you planned on holding either stock for longer (e.g. for 30 years)?