3. Squarepants Formal Wear just paid a dividend of $7. Earnings per share for the most recent year was $10. The firm maintains a policy of paying out 70% of earnings as dividends. The following information applies: SPFW=1.8MarketRiskPremium(RMRF)=5%10yearTreasuryBondRate=2%ROE=20% a) What is the company's sustainable growth rate? Returnonequity*(1-dividedpayoutratio)=20%(170%)=20%30%=6% b) Estimate the company's value using a constant growth dividend model. c) Suppose the company expects earnings and dividends to grow at 20% for the next two years and then grow at the sustainable growth rate thereafter. Estimate the value of the company using a two-stage model. (2 points)