A company currently has earnings (E₀) of $5.00 and a dividend (D₀) of $0.50. The firms current return on equity (ROE) is 40%. The firm will maintain the same dividend payout and ROE over the next two periods. Then it will transition in a linear reduction in years 3, 4, and 5 to a growth of 3%. The firm will then grow at 3% to perpetuity. The firms beta is presently 1.4, but this will transition to 1 over the same period. The risk-free rate is 4% and the market risk premium is 6%. ROE is expected to be 10% beginning in year 5 to perpetuity. What is the present value of this firms equity using a three-stage model with linear transition in years 3, 4, and 5?

$114.77

$102.19

$119.46

$94.59