$3.$ Calculate the intrinsic value of ABC Corp using a three$-$stage dividend model assuming:

$$ The current dividend is $$5$ per share and the current payout ratio is $30\%$ this is D$(0)$ and POR$(0)$ as I said in video EPS $=$ DPS $/$ POR use that to derive EPS$(0)$

$$ starting next year the company will increase the payout ratio by $10\%$ points per year $($ex$.$ from $25$ to $35\%)$ for the next $3$ years.

$$ The earnings per share is expected to grow $20\%$ 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 $4\%,$ hence the DPS will also grow at $4\%$

$$ The required rate of return is $10\%$

NOTE Dividend per shares $=$ Earnings per share X Payout Ratio

Payout Ratio $=$ The amount of earnings that a company pays out in dividends