Hunter Petroleum Corporation paid a $2 dividend last year, but the company expected that earnings and dividends will grow by 30% for the next two years before dropping to a constant 5% growth rate afterwards. The dividend is expected to grow at a constant rate of 5 percent forever. The required rate of return is 11 percent (this will also serve as the discount rate in this problem). (Use a Financial calculator to arrive at the answers.)

a. Compute the anticipated value of the dividends for the next three years. (Do not round intermediate calculations. Round the final answer to 3 decimal places.)

	Anticipated value
D1	$
D2	$
D3	$

b. Calculate the present value of the anticipated dividends for the first two years at a discount rate of 11 percent. (Do not round intermediate calculations. Round the final answers to 3 decimal places.)

	PV of dividends
D1	$
D2
Total	$

c. Compute the price of the stock at the end of the second year (P₂). (Round intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)

P2	=	D3
		Ke g

Price of the stock $

d. Calculate the present value of the year 2 stock price at a discount rate of 11 percent. (Do not round intermediate calculations. Round the final answer to 3 decimal places.)

Price of the stock (discounted) $

e. Compute the current value of the stock. (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Current value $