You have been hired as an equity analyst and asked to estimate the stock price of Target Corporation $($TGT$).$ See the questions on page $2.$ After examining its financials and growth expectations, you decide to use the dividend discount models $($DDM$)$ and price$-$multiples approaches to estimate the intrinsic value of Target.

Target$$s stock price, earnings per share $($EPS$),$ and dividends per share $($DPS$)$ for the past $5$ years are given below.

Fiscal Year Stock Price $ EPS $ DPS $

$201866\mathrm{.}435\mathrm{.}512\mathrm{.}52$

$2019124\mathrm{.}766\mathrm{.}362\mathrm{.}60$

$2020176\mathrm{.}538\mathrm{.}642\mathrm{.}68$

$2021231\mathrm{.}4414\mathrm{.}103\mathrm{.}16$

$2022149\mathrm{.}045\mathrm{.}983\mathrm{.}96$

Analysts have estimated Target$$s perpetual constant dividend growth rate at $8\%.$ Dividends are projected to increase at an annual rate of $10\%$ in the next five years $(2023-27).$ Beyond $2027,$ the annual dividend growth is expected to slow down to a constant growth rate of $8\%.$

Target$$s beta is estimated at $1\mathrm{.}0.$ The current U$.$S$.10-$year Treasury bond yield is $5\%.$ Historically, the market risk premium in the U$.$S$.$ stock market has been estimated as $6\%.$ The required return of a stock or the discount rate is estimated using the Capital Asset Pricing Model $($CAPM$)$ equation.

You have compiled the projected earnings per share for $2023$ for Target and Walmart in the retail store industry.

Retail Stores $($Stock Symbol$)$ Current Stock Price $

$($Oct $2023)$ Projected EPS $ for $2023$

Target $($TGT$)1057\mathrm{.}58$

Walmart $($WMT$)1556\mathrm{.}46$

Questions

Assume the last year $(2022)$ as year zero. Your assignment is to value Target as of October $2023.$ Answer the following questions. What is the value of Target using the past $5-$year average price$-$earnings multiple of Target?