2) Calculate the intrinsic value of ABC Corp using a three-stage dividend model assuming - The current dividend D(0) is $5 per share and the current payout ratio is 25%, EPS (0) = $25 -starting next year the company will increase the payout ratio by 10% points per year (ex. from 25% to 35% to 45% to 55%) for the next 3 years. - The earnings per share is expected to grow 25% per year for the next 3 years - The earnings per share is expected to grow 15% for years 4-6 (the payout ratio will not change from year 3. -The earnings per share in year 7 and beyond is expected to grow at a constant rate of 4% - The required rate of return is 10% Recall that DPS = EPS X POR HINT set this up in excel you have 7 years of dividends to extrapolate Horizon Value P(6) = D(7) / (r g); constant growth is in year 7 and beyond