The risk-free rate of return is 8.0%, the expected rate of return on the market portfolio is 18%, and the stock of Xyrong Corporation has a beta coefficient of 2.2. Xyrong pays out 30% of its earnings in dividends, and the latest earnings announced were $10.00 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? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Intrinsic Value

b.

If the market price of a share is currently $25.00, and you expect the market price to be equal to the intrinsic value 1 year from now, what is your expected 1-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Expected one-year holding-period return = ?%