Question 4 Flash Inc. was founded 5 years ago. It has been profitable for the last 2 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $1 dividend starting from today, then it will increase the dividend growth by 50% for the next two years, and then the company will achieve a long run growth rate of 7.5%. Assuming a required return of 12%, what is your estimate of the stock's intrinsic value today?

a) Calculate the Flash Inc. non-constant dividends.

b) Calculate the Flash Inc. horizon value.

c) What is the firm's intrinsic value today, P 0?

Mention the appropriate BA II Plus keys (where required).