Julies X-Ray Company paid $2.00 per share in common stock dividends last year. The companys policy is to allow its dividend to grow at 5 percent for 4 years and then the rate of growth changes to 3 percent per year from year 5 and on. What is the value of the stock if the required rate of return is 8 percent

Dividend End of Year 1 = 2*1.05 = $2.10

Dividend End of Year 2 =2.10*1.05 = $2.21

Dividend End of Year 3 = 2.21*1.05=2.32

Dividend End of Year 4 =2.32*1.05 = 2.43

Dividend End of Year 5 = 2.43*1.03=2.50

Value of Stock at end of year 4 = D5/(r-g) = 2.50/(.08-.03) = $50

Value of Stock today

= 2.10/(1.08) + 2.21/(1.08^2) + 2.32/(1.08^3) + 2.43/(1.08^4) + 50/(1.08^4) = $44.22