You just got hired at an investment management firm, where you will be performing equity research. You are told to prepare a buy recommendation for a company of your choice to be presented to the partners for evaluation. Tool Mania catches your attention as a possible buy. The company just paid an annual dividend of $3.75 per share. You project dividend growth of 10% for the next 5 years in par with revenue growth. After that you project the company will grow at the equivalent of GDP at 3% forever. The company uses a fixed required rate of return of 15%. At which stock price will you issue a buy recommendation for this company?

• $45.96
• $39.97
• $42.21
• $38.38

Explain with details please