The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected to grow at a rate of 25% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year.

a) What is your estimate of intrinsic value per share? (4 marks)

b) If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (4 marks)