Your boss, Sally Maloney, treasurer of Fred Clark Enterprises $($FCE$),$ asked you to help her

estimate the intrinsic value of the company's stock. FCE just paid a dividend of $$1\mathrm{.}00,$ and the

stock now sells for $$10\mathrm{.}00$ per share. Sally asked a number of security analysts what they

believe FCE's future dividends will be$,$ based on their analysis of the company. The consensus

is that the dividend will be increased by $10\%$ during Years $1$ to $3,$ and it will be increased at a

rate of $5\%$ per year in Year $4$ and thereafter. Sally asked you to use that information to

estimate the required rate of return on the stock, $r_5,$ and she provided you with the following

template for use in the analysis.

The Calculated Price will equal the Actual Market Price

once the correct $r_s$ has been found.

Sally told you that the growth rates in the template were just put in as a trial, and that you

must replace them with the analysts' forecasted rates to get the correct forecasted dividends

and then the estimated HV$.$ She also notes that the estimated value for $r_5,$ at the top of the

template, is also just a guess, and you must replace it with a value that will cause the

Calculated Price shown at the bottom to equal the Actual Market Price. She suggests that,

after you have put in the correct dividends, you can manually calculate the price, using a

series of guesses as to the Estimated $r_s.$ The value of $r_s$ that causes the calculated price to

equal the actual price is the correct one. She notes, though, that this trial$-$and$-$error process is

quite tedious, and that the correct $r_s$ could be found much faster with a simple Excel model,

especially if you use Goal Seek. What is the value of $r_s?$

$20\mathrm{.}46\%$

$16\mathrm{.}91\%$

$13\mathrm{.}02\%$

$18\mathrm{.}27\%$

$14\mathrm{.}88\%$