The problem is answered in Chegg but no work was shown, could you please show how you got the answer???

Start with the partial model in the file Ch07 P22 Build a Model.xls on the textbooks Web site.

D₀

$2.50

r_s

11.0%

g_0,1

30%

Short-run g; for Year 1 only.

g_1,2

15%

Short-run g; for Year 2 only.

g_L

5%

Long-run g; for Year 3 and all following years.

g

30%

15%

5%

5%

Year

0

1

2

3

Dividend

3.25

PV of dividends and PV of horizon value

= D₂ (1+g) = D₃

= Horizon value = P₂ =

6.0%

= r_s g_L

= P₀

Hamilton Landscapings dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent years. Hamilton has just paid a dividend of $2.50, and its stock has a required return of 11%.

a. What is Hamiltons estimated stock price today?

b. If you bought the stock at Year 0, what are your expected dividend yield and capital

gains for the upcoming year?

c. What are your expected dividend yield and capital gains for the second year (from

Year 1 to Year 2)? Why arent these the same as for the first year?