Let's assume Sky Limited intends to pay a $1 dividend per share next year and it is expected that this would increase by 5% per year thereafter. Let's further assume the required rate of return on Sky Limited’s stock is 10%. Currently, XYZ Company stock is trading at $10 per share. Further, assume that during the next few years, Sky Limited’s dividends will increase rapidly and then grow at a stable rate. Next year's dividend is still expected to be $1 per share, but dividends will increase annually by 7%, then 10%, then 12%, and then steadily increase by 5% after that.
Compute the intrinsic value and fair value of Sky Limited’s stock.