1. Weil Software Products has current earnings of $3. Dividends represent 20% of the earnings. The dividend is expected to grow at the rate of 15% a year for next 3 years, followed by a growth rate of 12% a year for the following 2 years. After that, the dividend is expected to grow at the rate of 7% a year. In addition, current risk free rate is 4%, and the expected return on the market for the coming year is 15%. If Weil has a beta of 0.75 calculate the intrinsic value of Weil Software?

2. IBM is expected to pay a dividend of $3.80 next year, $4.20 the following year, and $6.60 each year thereafter. The required rate of return on this stock is 16%. How much should investors be willing to pay for this stock? Suppose the market price for IBM is $40, is IBM overvalued in the market?