Question 1: Hamilton common stock will pay an annual dividend of $2.20 one year from now. The company increases the dividends by 2.5% annually. Your required return on this stock is 15%. Assume that you purchase the stock today and sell it three years from now. What will be the dollar amount of your capital gain for those three years?
Question 2: The common stock of Tarmot Industries is valued at $10.08 a share. The company increases their dividend by 3.5% annually and expects their next dividend to be $1.24. What is the required rate of return on this stock?