1. Virtual Teach Limited has just paid a dividend of $1.50 per share. The company is expected to have a stronggrowth of 12% per annum for the next two years. However, after this two-year period, the company is expected to grow in line with the overall economy's growth of 4% per annum. If the required rate of return is 15%, what is the expected fair value of Virtual Tech's shares based upon a dividend-based model?
2. Discussthepros and cons of using a dividend-based model to evaluate a stock.