Suppose Big D, Inc. Just paid a dividend of $2. It is expected to increase its dividend by 3% per year. If the market required return on assets of the risk increases (assume other parameters hold constant), then the stock intrinsic value should...

a. Increase

b. Decrease

c. First increase then decrease

d. Not Change

Suppose a firm is expected to increase its stock dividends by 10% for the first three years. After that dividends will increase as a rate of 4% per year indefinitely. If the last dividend was $5 and the required return is 16%, what is the fair price of the stock in year 3 or P3?

a. $13.33

b. $17.17

c. $3.92

d. none of the above.