Sara Inc's most recent earnings per share were $2.00. Sara has a consistent policy of paying out 30% of its earnings as dividend. Researchers say that Sara earnings will grow at a constant rate of 10% over the next 5 years, and then will grow at 5% after this. The cost of capital is 9%.

a. using the norma two-stage dividend growth model find the value of the stock

b. using the trailing p/e method as opposed to the gordon growth model like in a to estimate terminal value and re-estimate your value of Sara Ince. Assume a trailing P/E ratio of 10 in the terminal year

C. What P/E ratio would "justify" using either valuation model? in other words, what terminal p/E ratio give you the same intrinsic value you found in a using the two stage gordon model?