You are analyzing a stock. The company will pay a dividend of $3 in the next year (t =1). The company's dividend payout ratio is 75%. Your estimate of the discount rate (= k) for the stock is 8%. The current market price of the stock is $62 per share.

1. (1 point) What is the stock's value of assets in place?
   • Hint: Payout ratio = Dividends / Earnings
2. (1 point) Suppose that the stock is fairly valued. What percentage of the stock price is represented by its growth opportunities?
3. (1 point) Suppose that the stock is not fairly valued. The company's ROE is 12%. What is the growth rate (= g) of the company?
   • Hint: Growth rate g = Plowback ratio x ROE
4. (1 point) Calculate the intrinsic value of the stock using the constant-growth DDM. Is the stock currently overvalued or undervalued?

Tip: You can answer Parts C and D without Parts A and B.

Note: You must show your calculation steps briefly and clearly.