All Fresh Fruit Co.'s latest earnings have just been 20 released and are $2.00 per share (Eo). Projections are that EPS will grow at an annual rate of 20% for the next two years, at a 12% rate for the following two years and at 6% annually thereafter. The dividend payout ratio is expected to be 25% for the first two years, 40% for [ the following two years and 50% thereafter. At the end of year 4, the price earnings ratio for the company is expected to be 10.6. This price earnings ratio is in effect AFTER you pay the dividend at the end of year 4. Hence, you get the dividend at the end of year 4 and have a stock that is also worth 10.6 times the year 4 earnings.

(a) Calculate the appropriate discount rate for AFFC assuming that it remains constant O asw mi over the life of the firm.

(b) What is the price per share of AFFC today?