This year Fundamental Toys is on target for paying $1.24 per share in dividends.

Next year the president and the Board expect to see a growth at 7%. The following year has a projected growth accelerate to reach 10% and continue at 10% for another 3 years. After that it will fall back to the current 7% growth. To summarize: Year 1= 7%; Years 2, 3, 4 = 10%; then going forward = 7%.

You are not totally familiar with these calculations, but this is a good learning opportunity. Some guidelines have been provided below.

Please use the nonconstant growth model to calculate the expected price of the stock now.

Determine the one additional component X you need to use to figure this out in the nonconstant growth model.

Here is information that might help you determine X: our beta is about 1.32. If you decide to use the CAPM, please use the 3-month Treasury bill rate from http://www.bloomberg.com/markets/rates/index.html.

With this information in hand, you can proceed as follows:

First use CAPM to determine your factor X.

Then start applying the nonconstant and constant growth models to determine your cash flows per period.

Do not forget to calculate the horizon or terminal value of the companys stock.

Discount the obtained cash values.

Sum the discounted values up for the price of stock valuation.

***Any help, guidance, and step by step calculation is VERY much appreciated!*********