Question text Estimated time 15 mins. 4. 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 QyickBrush Company at $63 per share. She now must value Smile White Corporation. (LO 13-2) a. Calculate the required rate of return for SmileWhite using the information in the following table: Quick Brush Smile White 1.15 $30.00 Beta Market price Intrinsic value Risk free rate Expected market portfolio return 1.35 $45.00 $63.00 4.50% 14.50% b. Ludlow estimates the following EPS and dividend growth rates for SmileWhite: Estimate the intrinsic value of SmileWhite using the table below and the two-stage DDM. Dividends per share in 2010 were $1.72. 12% First three years Years therafter 9% c. Recommend QyickBrush or SmileWhite stock for purchase by comparing each company's intrinsic value with its current market price. d Describe one strength of the two-stage DDM in compari son with the constant -growth DDM. Describe one weakness inherent in all DDMs. Smile White 1.15 Quick Brush 1.35 45.00 $/share 3.00 $/share Beta Market price Intrinsic value rf 30.00 $/share rm a) b) 8 Quick Brush Smile White Years 1-3 Years 4 and thereafter D 2010 D 2010 2011 2012 2013 2014 2015 2016 Dividend Price in 2013 Cash Flow Discount factor Discounted Cash Flow Price in begining 2011 c) Quick Brush Smile White Beta Market price Intrinsic value We recomend