a.Assume that Bon Temps is expected to experience supernormal growth of 30% for the next 3 years, then to return to its long-run constant growth rate of 6%. What is the stocks value under these conditions? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4?

b.Suppose Bon Temps is expected to experience zero growth during the first three years and then to resume its steady-state growth of 6% in the fourth year. What is the stocks value now? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4?

c.Assume that Bon Temps earnings and dividends are expected to decline by a constant 6% per yearthat is, g = 26%. Why might someone be willing to buy such a stock, and at what price should it sell? What would be the dividend yield and capital gains yield in each year?

d.Bon Temps financial statements show the following information:

Average cost of funds10.0 %

EBIT$500,000

Total capital$1,250,000

EPS$2.00

Shares outstanding150,000

Marginal tax rate30.0%

(1)Compute the companys economic value added (EVA)

(2)Interpret the value you computed in part l(1).

e.Suppose that normally Bon Temps P/E ratio is 20x. Using the information given in part (l), estimate the market price per share for Bon Temps common stock.