The yield on 10 year A Treasury Bonds is 3% and the market return is 5%. You are studying A stock which has a beta of 1.2. A has just paid a dividend of 1.20 and expects dividends to grow at a rate of 4% per annum for the next 5 years, and to slow down to 2% growth per annum thereafter.

By Using Excel to calculate, showing necessary workings,

1. Calcaulate the discount rate you should apply to A Stock.
2. What is the intrinsic value of A Stock?
3. If Dividends stop growing after the first 5 years, what is the intrinsic value of A Stock?