16. Repurchases and the DCF model (S15.2) Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next year’s earnings are forecasted at $56 million. There are 10 million outstanding shares. The company has traditionally paid out 50% of earnings by repurchases and reinvested the remaining earnings. With reinvestment, the company has generated steady growth averaging 5% per year. Assume the cost of equity is 12%.

a. Calculate Surf & Turf’s current stock price, using the constant-growth DCF model from Chapter 4. (Hint: Take the easy route and estimate overall market capitalization.)