As a Wealth Manager at Crimson Wealth, you are responsible for making recommendations to clients regarding common stocks. Your research on Core Inc, shows that dividend has been growing at a rate of 10% per year to the current dividend (D0) of $1.75 per share. The stock is now selling for $45 per share, and you believe that an appropriate discount rate of return for this stock is 15%

A. If you expect that the dividend will grow at 10% rate into the foreseeable future, what is the highest price at which you would recommend purchasing this stock for your clients? You are free to use whichever method you are most comfortable with! If you need additional "scratch paper", you may use the "ScratchSheet"

Dividend at time 0 (D0)

$1.75

Market Capitalization Rate (RRR)

15.00%

Growth Rate of Div. (G)

10.0%

Stock Price

$45.00

Use an IF statement to determine your answer

Overvalued/Undervalued?

B. Supposed now that you believe that Core's new computer chip will rival Pentel's, resulting in higher growth in the near future. Your new estimate is for a 5 year period of 30% annual growth followed by a return to the historical growth rate of 10%. Under these new assumptions, what is the value of the stock using the two stage dividend growth model? Calculate this price both manually and using the FAME_TwoStageValue function.