The Mercier Corporation's stock has paid dividends of RM 1.50 over the past 12 months. Earnings and dividends are expected to grow at a rate of 15% during the next two years then trend downward by 13% on the following year and finally stabilize at a constant growth of 5% thereafter.
a.If investors expect a return of 12% on their investment in Mercier stock, what should be its current price?
b.Calculate Price for year nine if the third year dividend and onwards are expected to grow at the rate of 15% similar to year 1&2 until year eight and falling off to a constant 7% thereafter.
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