Greg wants your advice on a potential stock purchase. There is excess capital on the balance sheet and he wants to put it to good use. He is excited because he heard that Alt Techs stock is trading at $75. He notes that Alt Tech. just paid out $1.7308M in dividends and repurchased $4.3983M worth of shares. Alt Tech. has 1.12M shares outstanding. Total payouts are expected to grow at an annual rate of 5%. Greg like the other investors of Nate Industries expects a 12% rate of return on shares.

a) What should Greg do? You recall from your finance class that you should use the Total Payout model to estimate of the stock price today. You can assume that all payouts occur annually and that the next payout will be in exactly one year. Show your work and clearly state your final answer.

(b) Greg thanks you for your advice. But, thinking about it some more, he asks you if he should buy or not buy the stock if the stock were currently trading at $100 instead of $75. What do you advise him?

(c) Greg wonders how things might be different if the payouts mentioned above did not grow by 5% - but instead were flat. Should the stock be purchased? Assume that the price is still $75.

Someone mentioned that you need NET INCOME to complete this question, I have been told you can do it without. I personally disagree, if you do as well, please let me know.