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1. Computech Corporation is expanding rapidly and currently needs to retain all of its earnings;...

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Finance

1. Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 41% per year - during Years 4 and 5, but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 18%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.

2. Carnes Cosmetics Co.'s stock price is $48, and it recently paid a $1.00 dividend. This dividend is expected to grow by 15% for the next 3 years, then grow forever at a constant rate, g; and rs = 14%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places.

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