In year 2008, Janet's firm is using a two-stage dividend discount model (DDM) to find the intrinsic value of SmileWhite Co.

The risk-free interest rate is 4.5% and expected return of market is 14.5% and beta of the SmileWhite Co. is 1.15.

In 2008, dividend per share is $1.72 for the company. Dividends are expected to grow at a rate of 12% per year for the next three years until 2011. After 2011 dividend growth rate will be at constant rate 9% per year indefinitely.

What was the intrinsic value of SmileWhite Co. stock when the analyst was evaluating the stock (that is in year 2008)?

Question 15 options:

	$29.64
	$28.74
	$28.94
	$29.84

Question 16 (3 points)

If the price of SmileWhite Co. was $26.00 at the time of this evaluation process in year 2008, was the stock overpriced or underpriced security considering the intrinsic value obtained by the two-stage DDM. What should be the trading strategy based on the evaluation.

Question 16 options:

	Stick overpriced, buy and hold
	Stock overpriced, short selling yields profit
	Stock underpriced, buy and hold
	Stock underpriced, short selling yields profit