$P_0$

$D_1$

$g$

$r_5$

$(7)$ What would the stock price be if its dividends were expected to have zero growth?

$9$

$P_0$

$(8)$ Now assume that Bon Temps's dividend is expected to grow $30\%$ the first year, $20\%$ the second year, $10\%$ the third year, and return to its long$-$run constant growth rate of $4\%.$ What is the stock's value under these conditions? What are its expected dividend and capital gains yields in Year $1?(9)$ In Year $4?$

$g_{s,1}$

gs$,2$

$30\%$

gs$,3$

$20\%$

$g_{L,4}$

$10\%$

$r_s$

$4\%$

$0\mathrm{.}0\%$

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