Nonconstant Growth Stock Valuation

Reizenstein Technologies (RT) has just developed a solar panelcapable of generating 200% more electricity than any solar panelcurrently on the market. As a result, RT is expected to experiencea 16% annual growth rate for the next 5 years. By the end of 5years, other firms will have developed comparable technology, andRT's growth rate will slow to 5% per year indefinitely.Stockholders require a return of 11% on RT's stock. The most recentannual dividend (D₀), which was paid yesterday, was$2.40 per share.

(2) Calculate the estimated intrinsic value ofthe stock today,  . Proceed by finding the present valueof the dividends expected at t = 1, t = 2, t = 3, t = 4, and t = 5plus the present value of the stock price that should exist at t =5,  . The  stock price can be found by usingthe constant growth equation. Note that to find  you usethe dividend expected at t = 6, which is 5% greater than the t = 5dividend. Round your answer to the nearest cent. Do not round yourintermediate computations.

(3) Calculate the expected dividend yield(D₁/  ), the capital gains yield expectedduring the first year, and the expected total return (dividendyield plus capital gains yield) during the first year. (Assumethat  = P₀, and recognize that the capitalgains yield is equal to the total return minus the dividendyield.). Round your answers to two decimal places. Do not roundyour intermediate computations.

Expected dividend yield	%
Capital gains yield	%
Expected total return	%

Also calculate these same three yields for t = 5 (e.g.,D₆/  ). Round your answers to two decimalplaces. Do not round your intermediate computations.

Expected dividend yield	%
Capital gains yield	%
Expected total return	%