The Gesserit Corporation had recently announced $6 earnings per share and the continuation of 30% return on equity which is expected to continue forever. The stock discount rate is 15%.

a. Assuming an 90.0% payout ratio that will continue indefinitely; calculate the Gesserit stock price.

b. Management considers a worldwide expansion that will require retaining maximum capital, thus paying no dividends for 10 years. After that, in year 11, they will return to 90.0% payout that will continue that payment level forever. Calculate the stock price if management peruse this strategy.