The Club Auto Parts Company has just recently been organized. It is expected to experience no growth for the next 2 years as it identifies its market and acquired its inventory. However, Club will grow at an annual rate of 5% in the third year and beginning with the fourth year, should attain a

10% growth rate that it will sustain thereafter. The first dividend (D1) to be paid at the end of the first year is expected to be $0.50 per share. Investors require a 15% rate of return on Clubs stock.

a. What is the current equilibrium stock price?

b. What will Clubs stock price be at the end of the first year?

c. What dividend yield and capital gains yield should an investor in Club expect for the first

year?

solve using formula please