You have thoroughly analyzed a stock and have estimated that the following dividends will be paid. At the end of the first year = $1, at the end of the second = $2, at the end of the third = $2.5. After this, dividends will grow at a constant 5% forever. You believe that a discount rate of 14% is appropriate given the riskiness of the security. (Hint: Look at Non constant rate of growth.

8-6) What is the current price of the stock at P0?

What is the dividend yield at P0?

What is P1?

What is the capital gain between P0 and P1?