QUESTION 14 Find the value of the Stock with non-constant growth Consider the publicly traded firm Gemma Corp. Their last dividend paid was $4.14. The growth rate is expected to be 7% for the next three years and then 3% forever after that. The firm's required return (rs) is 11.0%. What is the best estimate of the current stock price? Do not round intermediate calculations. Step 1: draw the dividend timeline for this problem and grow each dividend by the appropriate rate-stop at year 4 D1= (4.14)*(1.07) - keep answers at 4 decimals D2=(4.14)*(1.07 (1.07) D3= 4.14) (1.07)(1.07)(1.07) D4=(4.14)1.07)(1.07)(1.07)(1.03) - stop here Step 2: Using the dividend paid in year 4 (the first dividend calculated using constant growth) find the horizon value of the stock [D/ (r-g)] o remember r and g should be used as decimals (0.11) and (0.03) since they are going into an equation use the required rate of return for () and the stable growth rate for (9) Step 3: Be careful that this value belongs at year 3 (one year prior to the start of stable growth-remember this rule from the Chapter 5 perpetuities) Now discount everything in the timeline including the Horizon Value, D1, D2, and D3 to present value (remember finding the PV of uneven cash flow streams in Chapter 5) Add up all the present values and this is the answer Do not include the initial 4.14 in your answer this dividend is in the past, so it is not included. We are interested in future dividends that a shareholder would receive if the stock was purchased today. Your answer represents the estimate of the stock's true value in dollars depending on how you rounded intermediate answers, you should be within $1.00 of the answer $59.29 O $65.29 O $70.36 O $79.54 QUESTION 15 Find the value of the Stock with non-constant growth Again Consider the publicly traded firm Gemma Corp. Their last dividend paid was $2.6. The growth rate is expected to be 9% for the next two years and then 2% forever after that. The firm's required return is 14% What is the best estimate of the current stock price? Do not round intermediate calculations. And include two decimals in your