16. (10 pts) Toddler Inc. has reported ROE of 7.9% and a dividend payout ratio of 40%. Its expected dividend payout for the next year is $3.8 per share, and the market capitalization rate is 6.74%. Assume the constant growth DDM.

(a) (2 pts) What is the dividend growth rate of Toddler?

(b) (4 pts) What is Toddler's intrinsic value for today (t0)?

(c) (4 pts) What is Toddler's intrinsic value if measured three years from today (t3)?

17. (10 pts) Flyers, Inc., just paid an EPS of $4.9 this year. Flyers is expected to maintain a retained earnings ratio of 50% and ROE of 5.5% for the next five years. After the fifth year, ROE is expected to decrease to 3.3%. Applying the cost of equity of 5.8% and the supernormal growth model, compute the intrinsic price of Flyers.

18. (8 points) Hayley Motorcycle Company just paid a dividend of $1.4 today, and is expected to pay a dividend in year 1 of $1.8, a dividend in year 2 of $2.3, a dividend in year 3 of $2.9, and a dividend in year 4 of $3.8. After year 4, dividends are expected to grow at the rate of 0.8% per year. An appropriate required return for the stock is 6.8%. Using the different-stage growth model, the stock should be worth __________ today.

19. (10 pts) Doolittle Co. is expected to pay a dividend of $2.3 next year. Doolittle is expected to pay 20% of its earnings as dividends and will have an ROE of 9% until the fourth year. After that, its ROE is expected to decrease to 2.7% and the dividend payout ratio will increase to 30%. Applying the cost of equity of 11.6% and the supernormal growth model, compute the intrinsic price of Doolittle.

20. (17 points) Kirk Inc. has come out with a new and improved product, and is expected to have an ROE of 14.4%. It will maintain a plowback ratio of 30%. Investors expect a 6.3% rate of return on the stock.

(a) (4 pts) at what P/E ratio would you expect Kirk to sell?

(b) (8 pts) Kirk is expected to report an EPS of $5 for next year. Assuming Kirk's current value is measured with the constant growth DDM, compute the present value of growth opportunities for Kirk.

(c) (5 pts) If the present value of growth opportunities = 0, find the ROE for Kirk and explain why. Assume all else remain constant. (HINT: It is an intuitive question. While you need to give a number for an answer, you DO NOT need any calculation.)