FKK LLC is expected to have 3 years more of above industry growth with 10%, 9% and 8%. Last year EPS was $10. FKKs managers have been consistently paying half of its profits to shareholders and will keep payout ratio at this level during three years of extraordinary growth. However, as competition increases they plan to level off reinvestment rate to 25% after 3 years. In three years the broadband industry will bring on average 16% of accounting return on investment forever. Required return on equity is 12%. 1. Determine fair value of FKK's stock. 2. Evaluate managements decision to decrease reinvestment rate in the stable period? 3. Describe the multiples approach to firm valuation. Assess the advantages and weaknesses.