Question 2A ( 3 marks)

Asia Express Ltd. paid a dividend of $5.00 per share on its ordinary shares recently. The share is currently trading at $65. Dividends are expected to grow at a constant rate of 10% for the next two years, at which point the dividends will begin to grow at a constant rate indefinitely. Compute the current dividend yield. What is the growth rate of the expected annual dividend after year two? Assume the required rate of return is 15%.