Two scenarios:

A) The stock of Dravo Corporation pays a dividend at the rate of $2 per share. The dividend is expected to increase at a 10 annual rate for the next three years, at a 7 percent rate for the following two years, and then at 5 percent thereafter. What is the value of a share of stock of Dravo to an investor who requires a 20 percent rate of return?

B) Suppose that Dravo Corporation has recently witnessed a period of depressed earnings performance. As a result, cash dividend payments have been suspended. Investors do not anticipate a resumption of dividends until 2 years from today, when a yearly dividend of $0.25 will be paid. That yearly dividend is expected to be increased to $0.75 in the following year and $1.50 in the year after that. Beyond the time when the $1.50 dividend is paid, investors expect Dravo'ss dividend to grow at an annual rate of 5 percent into perpetuity. All dividends are assumed to be paid at the end of each year. If the same investors now is looking for an 18 percent rate of return on Dravo's stock, what is the value of one share of this stock to him today?