Eclipse Mints stock is expected to pay a dividend of $0.50 next year, $0.70 in the following year, $1.30 per year from year 3 to year 6, and $1.80 each year thereafter. Eclipse Mints is 25% more risky than market as a whole. Return on market is 11% and risk free rate is 4%. If the current price of Eclipse is $12, would you buy this stock?

Expected return of eclipse?

Present value of perpetuity in year 7?

Present value of perpetuity in year 0?

Present value of annuity in year 3?

Present value of annuity in year 0?

Present value of year 1?

Present value of year 2?

Price of Eclipse?

Comment on your decision.