The company AT&Ts current stock price is $33.79, and yesterday it paid a dividend of $1.85 per share. Analysts expect the dividend to grow at an 8% rate for the next three years (i.e. the next three dividends) due to the continued market growth of smartphones and increased usage of data services. Beginning with the dividend in year 4, analysts expect AT&Ts dividend growth rate to level off to 3% in perpetuity as these two revenue streams mature and data prices come down. Assume a 15% discount rate for the below questions.

What is the expected dividend two years from today? Round to two decimal places, i.e. 1.23.

Based on your analysis of AT&Ts forecasted dividends, what should todays stock price be? Round to two decimal places.

Refer to your answer on the previous question. Using this analysis alone (without any outside qualitative or strategic analysis), would you recommend buying AT&Ts stock?

Yes, I recommend purchasing the stock because my analysis shows that the market undervalues the stock.

No, I recommend not purchasing the stock because my analysis shows that the market overvalues the stock.