The risk-free rate of return is 7.0%, the expected rate of return on the market portfolio is 20%, and the stock of Xyrong Corporation has a beta coefficient of 1.8. Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $20 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 25% per year on all reinvested earnings forever. a. What is the intrinsic value of a share of Xyrong stock?

b-1. If the market price of a share is currently $58, and you expect the market price to be equal to the intrinsic value one year from now, calculate the price of the share after one year from now.

b-2. What is your expected one-year holding-period return on Xyrong stock?