You are analyzing DB’s stock, you find that the company paid dividends of $2.50 in 2008 and it consistently grew to an amount of $3.75 in 2010. The…

You are analyzing D&B’s stock, you find that the company paid dividends of $2.50 in 2008 and it consistently grew to an amount of $3.75 in 2010. The required rate of return on this stock is 15%.A) If you expect that the future dividend will continue to grow at the same rate for the foreseeable future, then how much should be the current price of D&B’s stock? Show your answers both in formula and cash flow format.B) If you expect that the growth rate that took place during 2008 through 2010 will continue for the next five years and it will slow down the normal rate of 5% from the sixth year and will continue for the foreseeable future, then what should be the price of the stock now? Show your answers both in formula and in cash flow format?







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