Please don't use Excel

Stock Valuation Question

(i) Maxis corporation is expanding rapidly and currently need to retain all of its earnings; hence, it does not pay dividends in year 1 and year 2. However, investors expected Maxis to begin paying dividends, beginning with a dividend of RM1.00 in year 3. The dividend should grow rapidly at a rate of 50% per year during Year 4 and 5; but after Year 5 growth should be a constant 8% per year. If the required rate of return on Maxis stock is 13%, what is the value of the stock today?

(ii) Briefly discuss the limitations of Constant Growth Model in the valuation of stocks.