Assume today is March 1, 2023. You are considering buying a stock on March 1, 2022 for a price of $200. You plan to sell the stock on January 1, 2025. The projected dividends and earnings per share are as follows:

Year Projected Dividends (October 1st every year) 2023 $4 2024 $5 2025 $6

Assume all dividends are paid on October 1st of each year.

The EPS at the end of 2025 is projected to be $32 (long term stable EPS)

Based on the dividend discount model, a) Estimate the present or theoretical value of the stock as of March 1, 2023. (Use 10% as the required return)

Hint: the first dividend in October 1st is 7 months from today March 1st.

b) Is this stock under or overpriced? By how many percent?