Recently, an analysis of Caterpillar Inc. found that its equity beta (the beta on its stock) is 1.03. The most recent annual dividend is $4.12/share. A survey of economist finds that the perceived market risk premium is around 6.5%. As of Oct 1, 2020, the yield on a 30-year U.S. Treasury was 1.45%. Given this information, answer the following questions.

a. Assuming dividends are NOT expected to grow in the future. What is the expected current share price given this information?

b. Assume dividends are expected to grow by 4% in perpetuity. Given this assumption, what is the expected current share price?

c. Assume that dividends are expected to grow abnormally for the next 3 years at a rate of 10%. Then, long-term dividend growth is expected to stabilize at 4% annually. Given this information, what is the expected current price?

d. The actual current price in mid-October is $168.75. Given this information and assuming a constant growth rate, what is the implied growth rate given this price?

e. Provide one or more possible explanations of why the actual price ($168.75) is so far above the prices calculated in parts (a), (b), and (c).