4.

DAA's stock is selling for $20 per share.

The firm's income, assets, and

stock price have been growing at an annual 15 percent rate and are expected to continue to grow at this rate for 3 more years.

No dividends have

been declared as yet, but the firm intends to declare a dividend of D3 = $3.00 at the end of the last year of its supernormal growth.

After that,

dividends are expected to grow at the firm's normal growth rate of 6 percent. The firm's required rate of return is 18 percent.

Is the stock

undervalued or overvalues and by how much?