Question 3 (20 marks)

Consider a firm that distributes the entire annual earnings to its shareholders through didends once a year. The firm's dividends are expected to grow at a rate of 3% per year for the nert S yeass until the end of 2035. From 2036 on, the firm's growth rate is expected to be 4% per year foreier Assume that investors command 12% return on the investments comparable to the farm's stock. In addition, the firm has just paid an annual dividend of $10 per share at the end of 2030.

Required: If you were considering buying the firm's shares on the fist day of 2031, at what price would you buy the shares?

*For full credit you must show the steps/calculation toward your results.