Lara is a security analyst with Texas City brokerage firm. Lara has been following one of the hottest issues on Wall Street, M&I Medical supplies, a company that has turned outstanding performance and showed excellent potential growth. It has 5 million shares outstanding and pays an annual dividend of $0.05 per share. Lara showed her interest in investing in M&I. Assume the company sales for the past five years have been as follows:

Year Sales ($ million)

2012 - 10.0 2013 - 12.5 2014 - 16.2 2015 - 22.0 2016 - 28.5

Lara relates to the prospects of the company, not its past. As a result, she generates the following estimate of future performance:

Expected Net Profit Margin =12% Estimated annual dividend per share = 5c Number of share s outstanding = No change P/E ratio at the end of 2017 = 35 P/E ratio at the end of 2018 = 50

Questions: 4. Determine the expected future price of the stock at the od 2017 and 2018. 5. Because of several intrinsic and market factors, Lara feels that 25% is a viable figure to use for a desired rate of return. a. Using a 25% rate of return and forecasted figures, compute the stocks justified price. b. If M&I is currently trading at $32.50 per share, should Lara consider the stock a worthy investment? Explain.