Investors require a 15% rate of return on Levine companys stock (that is, = 15%).

(1) What is its value if the previous dividend (0 ) was $2, and investors expect

dividends to grow at a constant rate of () -5%, () 0%, or () 5%?

(2) Using data from part (1) (0=$2), what would the Gordon (constant growth) model

value be if the required rate of return was 15% and the expected growth rate was

20%? Is this a reasonable result? Explain.