Whitehurst Associates is considering a substantial investment in the stock of Ivanhoe Enterprises. Ivanhoe currently (time 0) pays a dividend of $3 per share. This dividend is expected to grow at 15 percent per year for the next 3 years and 10 percent per year for the following 3 years. Ivanhoe’s marginal tax rate is 40 percent.

Whitehurst expects the value of the Ivanhoe stock to increase by 40 percent between now and the beginning of year 5.

If Whitehurst requires a 12 percent rate of return on investments of this type, what value would Whitehurst place on the Ivanhoe stock? P=758