Zissou Corp just paid a dividend of $1.00 Dividends are paid annually, are expected to grow at 2 percent per year for the foreseeable future. Appropriate discount rate for a share of Zissou Corp stock is 6 percent.

a) What price per share of Zissou Corp stock is consistent with these assumptions?

b) Suppose that the 6 percent discount rate above can be decomposed as a 2 percent risk-free rate and 4 percent that's compensation for risk. (6=4+2) If the discount rate goes to 7 percent (risk free yields going up...7=4+3) what is the new price of this stock?