Diamond House Exporting has a beta of 1.22, the risk-free rate of interest is currently 4%, and the required return on the market portfolio is 13%. The company has estimated its earnings per share (E.P.S.) will be $2.45 in the coming year (2021) and anticipates that its future E.P.S. will be $2.80 in 2022 and $3.25 in 2023. In the year 2024 and beyond it assumes that its E.P.S. will grow at a constant rate of 5%.

1. Estimate the value of Diamond House Exporting stock assuming E.P.S. grow at a constant rate of 6% each year forever.

2. Estimate the value of Diamond stock assuming E.P.S. grow at the rate given in the data in the opening paragraph of the problem.

3. Repeat part b, but now assume a major lawsuit has been filed against the company, and the potential loss has increased risk, causing investors to now require a 22% rate of return. What is the estimated price of the stock following the filing of the lawsuit?