The Chief Medical annual dividend per share was $3.00 for the most recent 12 months and was paid recently. Stocks with similar risks currently are priced to provide a 14% return. is a little-known producer of heart pacemakers. The earnings and dividend growth prospects of the company are disputed by analysts. Albert Bender is forecasting 5% growth in dividends indefinitely. However, his brother John is predicting a 20% growth in dividends, but only for the next three years, after which the growth rate is expected to decline to 4% for the indefinite future. Chief dividends per share are currently $3. Stocks with similar risk are currently priced to provide a 14% expected return.

1. What is the intrinsic value of Chief according to Albert?
2. What is the intrinsic value of Chief according to John?
3. Assume that Chief stock now sells for $39.75 per share. If the stock is fairly priced at the present time, what is the implied perpetual dividend growth rate? What is the implied P/E on next years earnings, based on this perpetual dividend growth assumption and assuming a 25% payout ratio?