Supernormal Growth Model Severn-Day Practice Package 1. Firm A is expected to pay $2 dividend next year. The dividend will then grow by 10% for another two years. After that, the dividend growth rate will decrease to 5% and last forever. How much would you like to pay for this stock if your required rate of return is 7%? 2. Firm B just paid a dividend of $1.6. The dividend will grow by 3% for one year and 5% for another three years. After that, the dividend growth rate will increase to 10% and last forever. How much would you like to pay for this stock if your required rate of return is 12%? 3. Firm C just paid a dividend of $1. The dividend will grow by 6% for two years and 8% for another two years. After that, the dividend will be constant forever. How much would you like to pay for this stock if your required rate of return is 10%? 4. Firm D is expected to pay $1 dividend in one year. This $1 dividend will keep constant for another three years and then grow by 5% forever. How much would you like to pay for this stock if your required rate of return is 10%? 5. Firm E is expected to pay $3 dividend in one year. This $3 dividend will keep constant for another two years and then grow by 5% for three years. After that, the dividend will grow by 2% forever. How much would you like to pay for this stock if your required rate of return is 6%? 6. Firm F is expected to pay $1.8 dividend in one year. This $1.8 dividend will keep constant for another two years and then grow by 20% for three years. After that, the dividend will keep constant again. How much would you like to pay for this stock if your required rate of return is 9%? Day 1: Draw Timelines with Growth Rate Indicated 1 Dimm A.