Answer:
- $427.97
- $223.22
Step-by-step explanation:
1. Target stock price in 5 years
First find the dividend in the 5th year;
= 1.75 * ( 1 + 21%)⁵
= $4.5390493
The calculate Earnings per Share;
= Dividend in 5th year/ Payout ratio
= 4.5390493 / 35%
= $12.968712
Now calculate the Share price;
= PE ratio * EPS
= 33 * 12.968712
= $427.97
2. Stock Price today assuming required return rate of 15%
This is the present values of all the dividends in addition to the stock price in 5 years.

= $223.22