The expected return on market portfolio is 15% and the risk-free rate is 8%. The stock of XYZ corporation has a beta coefficient of 1.2 and the company pays out 40% of its earnings in dividends. XYZs latest earnings were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that the company will earn an ROE of 20% per year on all reinvested earnings forever.

a- What is the intrinsic value of a share of XYZ stock?

b- If the market price of a share is currently$100, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected one-year holding period return on the Companys stock?