Valuing Stocks

Suppose Fledgling Electronic, whose investors expect a $$5$ cash dividend over the next year. Investors also expect the stock to sell for $$110$ in the upcoming year. Consider a $15\%$ expected rate of return for this security.

Requirements

$1.$ Calculate today$$s value of the stock. Show formulas, do the math step by step until the final result, and indicate units of measurement.

$2.$ Now, let$$s assume that Fledgling Electronic Stock$$s expected rate of return is still $15\%,$ the company is expected to pay a dividend of $$5$ the first year, and thereafter the dividend is predicted to increase indefinitely by $10\%$ a year. Calculate the stock price. Show formulas, do the math step by step until the final result, and indicate units of measurement.