Q1 A Enterprises recently paid a dividend, D0, of $2. It expects to have non-constant growth of 25% for 3 years followed by a constant rate of 5% thereafter. The firms required return is 11.5%.

a. How far away is the terminal, or horizon, date? b. What is the firms horizon, or terminal, value? c. What is the firms intrinsic value today, P^ 0 or PV?

B). You invest in preferred stock which pays you dividend of Rs. 8 every year forever. The stock currently yields 9%. a. What is the stocks value? b. Suppose interest rates rise and pull the preferred stocks yield up to 11%. What is its new market value? Why stock prices change as yield up?