Question 4. A. A private startup company has just gone public. It is not expected to pay any dividends for the first 2 years. It is then expected to pay dividends of $10 + $[second digit of your ID number] per share with 10% growth for 4 years. After those four years, it is expected to have a dividend growth rate of 2.5% forever. If the required rate of return is [first digit of your ID number] % + 100 bps, what is the value of the stock? ANSWER: Stock Price is $150.83

B. A public company that is a competitor to the private startup above is expected to issue dividends of $11 next year. At what growth rate would the public companys stock be identical to the stock of the private company above? The required rate of return for the public company is 212 bps.