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 level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year.

a. What is your estimate of the intrinsic value of a share of stock?

b. If the market price of a share is equal to the intrinsic value, what is the expected dividend yield?

c. What do you expect its price to be one year from now?

d. Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate?