Chiptech, Inc., is an established computer chip firm with several profitable existing products as well as some promising new products in development. The company earned $1.2 a share last year, and just paid out a dividend of $0.24 per share. Investors believe the company plans to maintain its dividend payout ratio at 20%. ROE equals 22%. Everyone in the market expects this situation to persist indefinitely a. What is the market price of Chiptech stock? The required return for the computer chip industry is 18% and the company has just gone ex-dividend (i.e., the next dividend will be paid a year from now, at t = 1). (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Market price of Chiptech stock $70.56 b. Suppose you discover that Chiptech's competitor has developed a new chip that will eliminate Chiptech's current technological advantage in this market. This new product, which will be ready to come to the market in 2 years, will force Chiptech to reduce the prices of its chips to remain competitive This will decrease ROE to 18%, and, because of falling demand for its product, Chiptech will decrease the plowback ratio to 0.7. The plowback ratio will be decreased at the end of the second year, at t 2 The annual year-end dividend for the second year (paid at t-2) will be 30% of that year's earnings What is your estimate of Chiptech's intrinsic value per share? (Hint: Carefully prepare a table of Chiptech's earnings and dividends for each of the next 3 years. Pay close attention to the change in the payout ratio in t 2.) (Round your answers to 2 decimal places. Omit the "$" sign in your response.) 3 At time 2 At time 0