YTK Inc. paid a dividend of $2.00 last year. The growth rate is expected to be 4% for 1 year, 5% the next year, then 4% for the following year, and then the growth rate is expected be to a constant 7% thereafter. The required rate of return on equity (rs) is 10%.

1. What is the current price of the common stock ().
2. What would be the stock price at the end of year 2 (

[Hint: equals to the sum of the PV of all future cash flow (i.e., D₃ and HV₃, horizon value at year 3) at the end of year 2]

I think I have the first question correct, but the second question I am not sure where to start. Any help is much appreciated.

P^2) P^2 P^0