(DDM-Three stage Model Question)

Cathy Evert has been given the assignment of preparing a business valuation of ABC LTD. The following information was collected:

High Growth Stage Stable Growth Stage

Return on Assets 19% 4%

Payout 35% 59%

Debt Ratio 0.20 0.65

Length 2 Years Indefinite

Beta 1.05 0.90

Evert expects the high growth period to phase into the stable growth period evenly over a 2 year period before reaching stable growth in Year 5. The 20 year government bond rate is 5% and the market risk premium is 4.5%. Dividends per share were $3.52 at the end of the last period. Estimate the intrinsic value of ABC's shares ?