Problem $8-05$

Gentry Can Company's $($GCC$)$ latest annual dividend of $$1\mathrm{.}40$ a share was paid yesterday and maintained its historic $8$ percent annual rate of growth. You plan to purchase the stock today

because you believe that the dividend growth rate will increase to $10$ percent for the next three years and the selling price of the stock will be $$40$ per share at the end of that

a$.$ How much should you be willing to pay for the GCC stock if you require a $15$ percent return? Do not round intermediate calculations. Round your answer to the nearest cent.

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b$.$ What is the maximum price you should be willing to pay for the GCC stock if you believe that the $10$ percent growth rate can be maintained indefinitely and you require a $15$ percent

return? Do not round intermediate calculations. Round your answer to the nearest cent.

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c$.$ If the $10$ percent rate of growth is achieved, what will the price be at the end of Year $3,$ assuming the conditions in Part b$?$ Do not round intermediate calculations. Round your answer

to the nearest cent.