8. B auer Inc., just paid a dividend of $4.50 per share. The company will increase its dividend by 10 percent next year and will then reduce its dividend growth rate by 2 percentage points per year until it reaches the industry average of 2 percent dividend growth, after which the company will keep a constant growth rate forever.

a. What is the price of this stock today given a required return of 13 percent?

b. What is the price of the stock 3 years after it reaches its constant growth rate?

c. What is the dividend yield and capital gains yield 3 years after it reaches its constant growth rate?

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