What is the stock price for each firm? A company will pay a dividend of $2 in 1 year. The dividend in 2 years will be $4, and it is expected that dividends will grow at 5% per year thereafter. The required rate of return of the stock is 7%. What is the current price of the stock (P_0)? What is the expected price of the stock in one year (P_1)? Show that the expected return, 7%, equals dividend yield plus capital gains