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You are trying to value the stock of RL using the following projections: Sales will...

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Finance

You are trying to value the stock of RL using the following projections: Sales will be 300 million in Year 1. Sales will grow at 15% in years 2 and 3 and 10% in Year 4. EBIT will be 17% of sales each year. Interest expense will be 10 million per year. Income tax is 30%. Earnings retention ratio is 60%. The dividend growth rate will be constant from Year 4 forward and this final growth rate will be 200 basis points less than the growth rate from Year 3 to Year 4. The company has 10 million shares outstanding and the required return is expected to be 13%. The current value of the stock based on the above assumptions is closest to:

42.18

Explain why please

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