As a value investor, you are always looking for bargains to purchase on the stock market. Currently, you have done some research on a company called StarShop that is priced today at $360 per share. The company does not pay a dividend yet.

After careful analysis, you believe that StarShop will pay its first dividend in exactly 12 years. You are making an educated guess but you project the dividend at the end of the 12th year will be $50.00 per share. You also assume that the company will grow dividends at 4% annually going forward at that point.

The risk free rate in the economy is 1.50% today. (assume it holds throughout). Also, the market portfolio risk premium is 6.00%, while the beta of StarShop is 1.20.

Which statement is correct regarding the current price of StarShop and its valuation? (if your assumptions are correct)

1. Starshop is undervalued and the price of the stock today should increase by $64.96.
2. Starshop is overvalued and the price of the stock today should decrease by $29.13.
3. Starshop is overvalued and the price of the stock today should decrease by $44.64.
4. Starshop is undervalued and the price of the stock today should increase by $81.96.
5. Starshop is undervalued and the price of the stock today should increase by $46.58.