Luke Warm is valuing the stock of an ice-processing business. He feels confident in his projection of earnings and dividends to three years (t = 3). Other information and estimates are as follows:

? Required rate of return = 11%

? Average dividend payout rate for mature companies in this market = 0.80

? Industry average ROE = 8.5%

? Earnings per share in year 3 = $2.50

? Industry average P/E = 10 On the basis of this information, answer the following questions:

A. Compute terminal value V3 based on comparables.

B. Contrast your answer in Part A to an estimate of terminal value based on the Gordon Growth Model.