A stock is currently selling for $$74$ and pays a dividend of $$2\mathrm{.}75.$ Dividends are expected to grow at a constant rate of $3\mathrm{.}5\%$ a year. Investors require a $7\%$ rate of return.

SLIDES ABOUT DIVIDENT DISCOUNT MODEL $($INSTEAD OF USING THE $15\%$ RULE USE $18\%$ RULE$)$

CHAPTER $3$ EXERCISE $2$

a$.$ Calculate the intrinsic value $($estimated price$)$ for this stock.

b$.$ If an analyst uses a $18\%$ rule

i$.$ At what price range would this stock be considered as overvalued?

ii$.$ At what price range would this stock be considered as undervalued?

iii. At what price range would this stock be considered as fairly priced?

iv$.$ Is this stock overvalued, undervalued, or fairly.priced?

c$.$ Using EXCEL's Text Box Feature explain the purpose of employing an $18\%$ rule in this valuation process?