Part 1:

Estimate the annual required rate of return for BTO stock using the Dividend Growth Model. BTO just paid an annual dividend of $10.16 per share, and the concensus analyst estimate is that the dividend will grow at 7.5% each year. The current market value of BTO stock is $82.43 per share. Answer as a % to 2 decimal places (e.g. 12.34% as 12.34 ).

Answer:

Part 2:

Starkiller Base Inc. expects to have a changing dividend policy over the next few years starting with the dividend that they just paid of $8.34. in the following year their dividend will grow by 17.9% and in the year after by 14.4%. Following that they expect their dividends to continue growing at a constant rate of 4.3% forever. If the required rate of return for Starkiller Base is 12.5% per year, what is the price today of their shares? Answer to the nearest penny.

Answer: