You are an analyst in charge of valuing common stocks. You have been asked to value two stocks. The first stock NEW Inc. just paid a dividend of $$4\mathrm{.}00.$ The dividend is expected to increase by $80\%,50\%,30\%,$ and $15\%$ per year respectively in the next four years. Thereafter the dividend will increase by $5\%$ per year in perpetuity.

a$)$ Calculate NEW$$s expected dividend for t $=1,2,3,4,$ and $5.$

The required rate of return for NEW stock is $12\%$ compounded annually.

b$)$ What is NEW$$s stock price?

The second stock is OLD Inc. OLD will pay its first dividend of $$6\mathrm{.}00$ three $(3)$ years from today. The dividend will increase by $20\%$ per year for the following $4$ years after its first dividend payment. Thereafter the dividend will increase by $4\%$ per year in perpetuity.

c$)$ Calculate OLD$$s expected dividend for t $=1,2,3,4,5,6,7$ and $8.$

The required rate of return for OLD stock is $18\%$ compounded annually.

d$)$ What is OLD$$s stock price?

Now assume that both stocks have a required rate of return of $30\%$ per year compounded annually for the first four years, $25\%$ per year compounded annually for the following five years, and thereafter the required rate of return will be $12\%$ compounded annually.

e$)$ What is NEW$$s stock price?

f$)$ What is OLD$$s stock price?

$($Hint: you may need to forecast more dividends than you did in parts a$,$ and c$.)$

Note $1$: You cannot use the NPV function to immediately value the stocks at time $0,$ as the required rate of return changes during the forecast period.

Note $2$: All calculations should be rounded to the nearest cent. That is $2$ decimal places.