Problem:
Paradise Tours, Inc. just paid a dividend of $3.50. Analysts expect the company's dividend to grow by 35% this year, by 20% in year 2, and at a constant rate of 5% in Year 3 and thereafter. The required rate of return on PTI's stock is 15.00%.
Required:
Question 1: What is the best estimate of the stock's current intrinsic value? Explain comprehensively and also show all workings.