A company is expected to have a return on equity of 20% for the next four years. Its current

stock price is $20. The company paid $1 in dividends in the most recent year, and had

earnings per share of $1.25. If the company maintains its payout ratio, how much will the firm

pay out in dividends over the next four years? If the company grows at its sustainable growth

rate for the next four years, and than at 3% into perpetuity, is the company correctly valued

today? Assume a required rate of return of 10%.