1. (CFA). Your firm has valued Quick-Brush Company at $63/share. You are now asked to value Smile-white Corporation using the following date provided Quick-Brush Smile-White

Beta 1.35 1.15

Market price $45.00 $30.00

Intrinsic value $63 ??

Risk free rate 4.5%

Return on market 14.50%

1. Calculate the required rate of return for Smile-White?
2. You estimate the following EPS and dividend growth rates for Smile-White:

First 3 years = 12% per year Years thereafter = 9% per year

Estimate the intrinsic value of Smile White? Dividend per share were $1.72

3. Recommend Quick-Brush or Smile-White stock for possible investment based on intrinsic values

Describe a strength and a weakness of the dividend growth model.