Please answer these two questions thoroughly and explain why you work out what you do. NOTE: You must use the Dividend Discount Model; this question has been posted multiple times with no right answer or explanation. Thank you!

Assume today is 30th June 2017 and you have just been paid a dividend and that the next dividend will be received in exactly one year (assume dividend is paid annually). The stock price as at 30th June 2017 was $38.30. a) You expect Flight Centre Ltd. to maintain the same dividend payout ratio as at 30th June 2017 for the next three years. After three years, the company will increase the dividend payout ratio to 70%. Assume company's return on new investment is 16.6% and the required rate of return is 10%. Using the dividend discount model, calculate the intrinsic value for stock today. b) Based on your answer in Part (a), would you recommend to buy, sell or hold the stock? Give the recommendation and briefly discuss the difference between the intrinsic value and stock price. (no more than 200 words) Flight Centre Travel Group Ltd (FLT AU) - Dividend Summary FY 2010 06/30/2010 0.7 FY 2011 06/30/2011 0.84 FY 2012 06/30/2012 1.12 FY 2013 06/30/2013 1.37 FY 2016 06/30/2016 FY 2017 06/30/2017 1.39 4.4141 1.52 3.577 In Millions of AUD except Per Share 12 Months Ending Dividends per Share Dividends per Share - 5 Yr Geo Growth Dividend Yield Dividend Payout Ratio Cash Dividend Coverage Dividends Paid Total Cash Preferred Dividends Total Cash Common Dividends Trailing 12M Preferred Dividends Trailing 12M Common Dividends Trailing 12M Dividends Per Share 1.5634 49.9374 2.0025 -25.9 0.0 69.8 0.0 69.8 0.7 3.7003 60.0536 1.66521 -79.9 0.0 84.0 0.01 84.01 0.84 4.7015 56.008 1.7855 -89.0 0.0 112.1 0.0 112.1 2.9748 55.9101 1.7886 -117.3 0.0 137.6 0.0 137.6 1.37 FY 2014 06/30/2014 1.52 76.0031 3.2846 73.879 1.3536 -146.8 0.0 152.9 0.0 152.9 1.52 FY 2015 06/30/2015 1.52 16.7748 4.4562 59.7343 1.6741 -153.1 0.0 153.3 12.5934 4.9715 62.7218 1.5943 -158.4 0.00 153.4 0.01 153.4 1.52 60.8399 1.6437 -138.3 0.0 140.4 0.0 140.4 1.39 0.01 1.12 153.3 1.52