Proctor and Gamble paid an annual dividend of $1.72 in 2009. You expect P&G to increase its dividends by 8% per year for the next five years (through 2014), and thereafter by 3% per year. If the appropriate equity cost of capital for Proctor and Gamble is 8% per year, use the dividend-discount model to estimate its value per share at the end of 2009.

2. Halliford Corporation expects to have earnings this coming year of $3 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 50% of its earnings. It will then retain 20% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 25% per year. Any earnings that are not retained will be paid out as dividends. Assume Hallifords share count remains constant and all earnings growth comes from the investment of retained earnings. If Hallifords equity cost of capital is 10%, what price would you estimate for Halliford stock?