6. Determine the value of Red Rivers stock. The EPS last year was $3.50. The companys payout ratio is 40% and the ROE is 12%. RRs beta is 1.1. Assume a risk-free rate of 2% and an expected return on the market of 10%.

7. Continuation from #6. If the above stock is in an industry that has a P/E of 13 what would be the price using the P/E valuation method? Take this price and the price in #6 and calculate an average price. With a 5% margin of error around this average price would you buy the stock for $48?