1. Wonder Widgets has introduced an improved product and the world is beating a path to its door. As a result, the firm projects growth of 20 percent per year for 4 years. By then, other firms will have copycat technology, competition will drive down profit margins, and the sustainable growth rate will fall to 5 percent. The most recent annual dividend was $1.00 per share.

1. What are the expected dividends for years 1, 2, 3, 4 and 5? Show calculations.
2. What is the expected stock price 4 years from today? Assume the appropriate discount rate is 10 percent.

What is the stock price today? Again, assume 10 percent is the appropriate discount rate.