Question 3 (Non-constant Growth and Negative Growth Dividend Discount Model) Part (a) South Side Corporation is expected to pay the following dividends over the next four years: $8, $6, $3, and $2....

Question 3 (Non-constant Growth and Negative Growth Dividend Discount Model)

Part (a)
South Side Corporation is expected to pay the following dividends over the next four
years: $8, $6, $3, and $2. Afterwards, the company pledges to maintain a constant 4
percent growth rate in dividends, forever.
If the required return on the stock is 13 percent, what is the current share price?
Part (b)
Antiques R is a mature manufacturing firm. The company just paid a $10 dividend,
but management expects to reduce the payout by 8 percent per year, indefinitely. If
you require an 11 percent return on this stock, what will you pay for a share today?