Talkie is a company that has a patent right for a new mobile technology that is expected to enable it to generate growth of 20% for next three years. From the beginning of year 4, the company expects to grow at a constant rate of 5%. The company just paid a dividend of $2.20 on 31 Dec of Year 0.

(a) Compute the estimate of the current price of Talkie shares. Assume the required return on equity is 10%.

The realized return of Talkie share and Stock M for the past 5 years are detailed below:

Year Talkie Stock M 2020 15% 30% 2019 5% 7% 2018 -5% -3% 2017 2% -8% 2016 9% 20%