Janet Ludlow's firm requires all its analysts to use a two-stage DDM and the CAPM to value stocks. Using these measures, Ludlow has valued QuickBrush Company at $63 per share. She now must value SmileWhite Corporation.

a. Calculate the required rate of return for SmileWhite using the information in the following table:

December 2010

Quick Brush BETA 1.35 Market Price $45.00 Intrinsic vlaue $63.00

SmileWhite BETA 1.2 Markt Price $28 Intrinsic Value= ??

Note: Risk-free rate = 3%; expected market return = 15%.

b. Ludlow estimates the following EPS and dividend growth rate for SmileWhite:

First three years:14% per yearYears thereafter:12% per year

Estimate the intrinsic value of SmileWhite in December 2010 using the table above and the two-stage DDM. Dividends per share in 2010 were $1.

Instruction: enter your answer as a decimal number rounded to 2 decimal places.

YearDividends

2010$1.00

2011$

2012$

2013$

2014$

Intrinsic stock value in 2013:$.

Intrinsic stock value in 2010:$.