use the following information to answer the questions. The made up company name is ABC.

Price: $20

R: 12%

G: 4%

D0: 1.10

P/E: 16

EPS: 1.25

Analyst E growth: 7%

Now answer the following below using the above information thats provided:

Part A-Fundamental Valuation:

1. Estimate a growth rate for your firm's Dividends per Share.

2. Assume a 12.5% discount rate.

3. Calculate an estimated value of a share of the stock using the constant-growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model.

4. Compare and contrast your valuation results with the current share price in the market.

5. Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the market valuation?

Part B - Relative Valuation:

6. Estimate a growth rate for your firm's Earnings per Share (EPS).

7. Determine an applicable Price-Earnings (P/E) ratio for your firm in 5 years.

8. Calculate an estimated value of a share of the stock in 5 years using the P/E ratio model (Eq. 8-10 in the textbook).

9. Respond to this question: Would you characterize your stock as undervalued or overvalued? Explain.

10. Respond to this question: Based on your valuations in parts A and B, would you invest in this stock? Explain.