The stock of a company will pay an annual dividend of $2 in the coming
year. The dividend is expected to grow at a constant rate of 5 percent
permanently. The market requires a 12 percent return on the company.
What is the current price of a share of the stock? What will the stock
price be 10 years from today?

Hi again cop189!!

Terms definition:

Pt = price at time t
P0 = today's price
Dt=dividends in period t
r = required rate of return (a.k.a. discount rate)
g = constant growth rate


What is the current price of a share of the stock?

P0 = D1/(r-g) = 
   = $2/(0.12-0.05) =
   = $28.57

The current price of a share of the stock is $28.57 .

                  ----------------------

What will the stock price be 10 years from today?


We know that 
Pt = D_(t+1)/(r-g) 
and 
D_(t+1) = Dt*(1+g) = D1*(1+g)^t 

Then:
Pt = D1*(1+g)^t/(r-g) = 
   = P0*(1+g)^t

We will have that:

P10 = $28.57*(1.05)^10 =
    = $46.54 

The stock price 10 years from now will be $46.54 .

-----------------------------------------------------------

For references see "EQUITY VALUATION" at Lehigh University:
http://www.lehigh.edu/~sgb2/finNotesEquityValuation.html

------------------------------------------------------------

I hope that this helps you. Feel free to request for a clarification
if you need it.

Regards.
livioflores-ga