bCalculate the intrinsic value of ABC Corp using a threestage dividend model assuming:

The current dividend D is $ per share and the current payout ratio POR is

starting next year, the company will increase the payout ratio by points per year ex from

to for the next years.

The earnings per share is expected to grow per year for the next years

The earnings per share is expected to grow for years the payout ratio will not change

from year

The dividend per share in year and beyond is expected to grow at a constant rate of

The required rate of return is

Recall that DPS EPS X POR