1. Consider the following information about Nelling Corp:

The expected return on the market is 8% and the riskless rate is 3%. Note that BVPS refers to book value per share.

1. What is the companys sustainable growth rate? (2 points)

2. Using the constant dividend growth model, estimate the value of the companys stock. (2 points)

3. What is the book value at the end of year 1? (2 points)

4. Suppose the company decreases their payout ratio to 50%. Estimate the companys stock price. (2 points)

EPS, $5 $3 DIV1 Beta 0.8 BVPS, (end of yr) $50