It is October 2021. You have been hired as an equity analyst and asked to estimate the stock price of the Target Corporation (TGT). After examining its financials and growth expectations, you determine to use dividend discount model (DDM) approaches to estimate the intrinsic value of Target.

The Value Line report for Target provides the following actual earnings per share (EPS) and dividends per share (DPS) for the past 6 years.

Year	EPS $	DPS $
2015	4.69	2.16
2016	5.01	2.32
2017	4.71	2.46
2018	5.39	2.52
2019	6.34	2.60
2020	8.64	2.68

Dividends have grown at an annual rate of 4.4% in the past 5 years. Industry analysts estimate 2021 dividend per share to be $3.16. Beyond 2021, dividend per share is projected to increase at an annual rate of 9.8% for four years (2022-25). Beyond 2025, the annual dividend growth is expected to slow down to a constant growth rate equal to growth rates recorded in the past 5 years.

The Value Line estimates Targets beta as 0.7. The current U.S. 10-year Treasury bill rate 1.6%. Historically, the market risk premium in the U.S. stock market has been estimated as 6%. The required return of a stock or the discount rate is most-commonly estimated using the Capital Asset Pricing Model (CAPM) equation.

Questions

Based on the above information, calculate the value of Target stock based on the following valuation approaches as of October 2021.

1. Constant dividend growth model

2. Two-stage dividend growth model