Questions 40 through 43 refer to the following information: New competition in Sophco's market is going to have an impact on the growth in the firm's dividends.A current dividend of $1.00 was paid yesterday by Sophco,and this dividend is expected to increase by 25%in the first year.After that point,the growth in dividends is expected to"decay"to the firm's long-run constant growth of 10%.Such a "decay"process is one in which dividend growth declines by 5 percentage points per year up to the point where the expected constant rate of dividend growth is reached.So,year 2 dividend will be 20 percent higher than year 1,year 3 dividends will be 15 percent higher than year 1,and after year 3,dividends will grow by 10 percent forever.For problems 40 -43,assume investors in Sophco require a rate of return of 15%. 40.Calculate Sophco's dividend in year 2. (a)$1.13 (b)$1.25 (c)$1.5 (d)$1.73 Answer:(c) 41.Calculate the Sophco's dividend in year 4. (a)$1.24 (b)$1.57 (c)$1.73 (d)$1.90 Answer:(d) 42.Determine the price of Sophco's stock at the end of year 3(just after the dividend has been paid). (a)$26.12 (b)$28.34 (c)$38.00 (d)$39.73 Answer:(c) 9-119-11 Questions 40 through 43 refer to the following information: New competition in Sophco’s market is going to have an impact on the growth in the firm’s dividends. A current dividend of $1.00 was paid yesterday by Sophco, and this dividend is expected to increase by 25% in the first year. After that point, the growth in dividends is expected to “decay” to the firm’s long-run constant growth of 10%. Such a “decay” process is one in which dividend growth declines by 5 percentage points per year up to the point where the expected constant rate of dividend growth is reached. So, year 2 dividend will be 20 percent higher than year 1, year 3 dividends will be 15 percent higher than year 1, and after year 3, dividends will grow by 10 percent forever. For problems 40 – 43, assume investors in Sophco require a rate of return of 15%. 40. Calculate Sophco’s dividend in year 2. (a) $1.13 (b) $1.25 (c) $1.5 (d) $1.73 Answer: (c) 41. Calculate the Sophco’s dividend in year 4. (a) $1.24 (b) $1.57 (c) $1.73 (d) $1.90 Answer: (d) 42. Determine the price of Sophco’s stock at the end of year 3 (just after the dividend has been paid). (a) $26.12 (b) $28.34 (c) $38.00 (d) $39.73 Answer: (c)