In 2020, Box Co. paid its shareholders an annual dividend of $3 a share. A major brokerage firm recently put out a report on Box Co. stating that, in its opinion, Box Co.'s annual dividends should grow at a rate of 10% per year for each of the next three years and then level off to grow at a rate of 6% per year thereafter.

Box Co. has a required rate or return of 12%.

Required:

a)Use the dividend discount model to determine the maximum price an investor should be willing to pay for one of Box Co.'s shares.

b)Use the dividend discount model to determine the maximum share price an investor should be willing to pay for one of Box Co.'s shares but assume that after Year 3, dividends have a 0% growth rate.