The Fed Corp. currently pays no cash dividends for the next 6 years. Its latest EPS was $5, all of which was reinvested in the company. The firms expected ROE for the next 6 years is 25% per year, and expected to reinvest all of its earnings. Starting in year 7, the firms ROE will be 20%, and the company start to paying out 30% of its earnings in cash dividends, and will continue to do forever after. The Fed market capitalization rate is 12% per year.

1. What is your estimate of Feds intrinsic value per share?

2. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? The year after?