You are considering buying a stock. It pays annual dividends of $1.75 a share indefinitely. It trades at a P/E of 12.1 times earnings and has a beta of 1.65. Treasury bills are currently earning 3.1% and the market return is 11.5%. You would like to hold this stock for 3 years, at which point you think EPS will be $3.65 per share. Given that the stock currently trades at $34, what is this securitys expected return and the securitys expected value? Considering the stocks intrinsic value, explain whether or not this is a good investment. Explain the interpretation of the P/E ratio.

(hint: consider zero-growth valuation model for expected price; this can differ from an estimated price using formulas needed for expected return).