The Stem Labs Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 25 percent a year for the next 5 years and then decreasing the growth rate to a constant 3 percent per year. The company just paid its annual dividend in the amount of $1.50 per share.

A. What is the current intrinsic value of one share of this stock if the required rate of return is 7.00 percent?

B. If the current market price of the stock is $38.24, is the stock overvalued or undervalued?

C. Based on your answer in part B., should Stem Labs Co. repurchase their shares in the open market?