The following questions are independent of each other

(a) DarkBi Co. Ltd. paid $5 cash dividend per share last year. Investment analysts expect that its dividend will grow at 5% in year 1, 8% in year 2, and 6% per year thereafter. Assume the yearly required rate of return of DarkBis common share is 14%, determine the per share value of DarkBi. (8 marks)

(b) You are interested in investing in the common shares of Logit Corp. Its common share is currently selling at $40 per share. You find that Logit paid a dividend of $4 share last year and its dividend has been growing at an average yearly rate of 5% over the last 10 years which you expect to continue in the foreseeable future. Assume the market price reflects the stocks value, find the required rate of return of Logits common shares and its expected share price one year from today. [Hint: Use the constant dividend growth model to first figure out the required return] (7 marks)

(c) Compute the rate of return expected from a stock that sells for $40 per share, pays a yearly dividend of $2, and is expected to sell for $44 per share in one year. (5 marks)