Tom Smithfield is valuing the stock of a food - processing business. He feels confident explicitly projecting earnings and dividends to three years (to t = 3). Other information and estimates are as follows:

• Required rate of return = 0.09
• Average dividend payout rate for mature companies in the market = 0.45
• Industry average ROE = 0.10
• E₃ = $ 3.00
• Industry average P/E = 12

On the basis of this information, answer the following questions:
A. Compute terminal value (V₃) based on comparables.
B. Contrast your answer in Part A to an estimate of terminal value based on the Gordon growth model.