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A.    Using the Discounted Dividend Model, calculate the price P0 if D1 = 20, k...

A.    Using the Discounted Dividend Model, calculate the price P0 if
D1 = 20, k = .15, g = r x ROE = .8 x .15 = .12, and Y1 = 100 per share

B.    What, then, will P5 be if:
D6 = 20, k = .15, and g = r x ROE = .8 x .15 = .12?

C.    If P5 = your result from part B, and assuming no dividends are paid until D6, what would be P0? P1? P2?

D.       Again, assuming the facts from part B, what is the relationship between P2 and P1 (i.e., P2/P1)? Explain why this is the result.

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