Q) It is now January 1, 2020. Innovis Electric Inc. has just developed a home solar panel capable of generating two times more electricity than any solar panel currently on the market. As a result, Innovis is expected to experience a 20 percent annual growth rate for the next 4 years. By the end of the 4 years, other firms will have developed comparable technology, and Innoviss growth rate will slow to 6 percent per year onwards. The beta of Innovis stock is 1.5, the market rate of return is 5 percent and the risk-free rate on government treasury securities has been 2 percent. The most recent annual dividend (D₀), which had been paid was $1.2 per share.

1)Compute the value of the stock today.

2)You realize that a more conservative valuation would complement the analysis. For that purpose, you mark down the annual growth rate for the first four years to be 15% followed by a constant growth rate of 3% afterward. You will also use a beta of 1.7 for the purpose of analysis. If the values for the last dividend, market return, and risk-free return remain the same, recalculate the stock price.