Question $2$ Company XYZ just paid a dividend of $$2$ per share. The dividend is expected

to grow at a constant rate of $5\%$ per year indefinitely. If the required rate of return for

investors is $10\%,$ what is the current value of the stock using the Gordon Growth Model?

Question $3$ Based on Question $2,$ suppose that company XYZ declares that its new Eu$-$

ropean plant is under construction and will increase the company's sales growth in $5$ years.

You therefore revise your expectation about XYZ$\text{'}$s dividend growth rate. That is$,$ it will be

$6\%$ annually starting from $2029.$ What is the new current value of the stock?

Show that the stock equals the present value

of all the dividends expected to be received into the indefinite future: