Martin Office Supplies paid a $8 dividend last year. Thedividend is expected to grow at a constant rate of 5 percent overthe next four years. The required rate of return is 15 percent(this will also serve as the discount rate in this problem). UseAppendix B for an approximate answer but calculate your finalanswer using the formula and financial calculator methods.

a. Compute the anticipated value of thedividends for the next four years. (Do not roundintermediate calculations. Round your final answers to 2 decimalplaces.)

	Anticipated Value D1 D2 D3 D4

b. Calculate the present value of each of theanticipated dividends at a discount rate of 15 percent. (Donot round intermediate calculations. Round your final answers to 2decimal places.)

PV of Dividends

D1

D2

D3

D4

Total

c. Compute the price of the stock at the end ofthe fourth year (P₄). (Do not roundintermediate calculations. Round your final answer to 2 decimalplaces.)

d. Calculate the present value of the year 4stock price at a discount rate of 15 percent. (Do not roundintermediate calculations. Round your final answer to 2 decimalplaces.)

e. Compute the current value of the stock.(Do not round intermediate calculations. Round your finalanswer to 2 decimal places.)

f. Use the formula given below to show that itwill provide approximately the same answer as part e.(Do not round intermediate calculations. Round your finalanswer to 2 decimal places.)

P0	=	D1
		Ke ? g

g. If current EPS were equal to $7.80 and theP/E ratio is 81% higher than the industry average of 6, what wouldthe stock price be? (Do not round intermediatecalculations. Round your final answer to 2 decimalplaces.)

h. By what dollar amount is the stock price inpart g different from the stock price in part f?(Do not round intermediate calculations. Round your finalanswer to 2 decimal places.)

i. With regard to the stock price in partf, indicate which direction it would move if:

(1)D1 increases

(2)Ke increases

(3)g increases