The common stock of Golf Resorts is currently trading at $28.73. The firm is expected to pay an annual dividend of $0.64 per share next year. Investors currently require a rate of return equal to 9.5% on common stock investments of this perceived risk level.

Required:

a) Assuming the market expects dividends of Golf Resorts to grow at a constant rate for the foreseeable future, what is the implied growth rate as expected by the market?

b) If investors now expect the dividend to be received next year of $0.64 per share will grow at an annual rate of 9% for the following year, then 7% during the subsequent two years, and then 5% per year thereafter, what is the maximum price investors would be willing to pay for this stock today? Assume investors require a 9.5% rate of return on this investment.

c) Briefly explain the limitations of the dividend discount model.

A fast response would be appreciated.