The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $14, all of which was reinvested in the company. The firms expected ROE for the next five years is 18% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firms ROE on new investments is expected to fall to 13%, and the company is expected to start paying out 45% of its earnings in cash dividends, which it will continue to do forever after. DEQSs market capitalization rate is 22% per year.

a. What is your estimate of DEQSs intrinsic value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Intrinsic value $

b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? (Omit the "%" sign in your response.)

The price should (Click to select) fall rise by % per year until year 6: because there is (Click to select) dividend no dividend , the entire return must be in (Click to select) capital losses capital gains .

c. What do you expect to happen to price in the following year?

Price in the six year $

d. What effect would it have on your estimate of DEQSs intrinsic value if you expected DEQS to pay out only 18% of earnings starting in year 6? (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$ and %" sign in your response.)

Time
Et	$
Dt	$
b	$
g	%