Willow Plastic Parts Inc. is experiencing rapid growth. Earnings and dividends are expected to grow at...

Willow Plastic Parts Inc. is experiencing rapid growth. Earnings and dividends are expected to grow at a rate of 18% during the next 2 years, 14% the following year, and then a constant rate of 6% during Year 4 and beyond.

Willow’s last dividend was $2.25.

The risk-free rate of return is 1.00%. Willow has a market Beta of 1.3 and the Expected Return of the Market is 22.0%.

Calculate the intrinsic value of the stock today. (Vo)

If the current market price of Willow Plastic Parts Inc is $40.00, do you consider Willow to be under or overvalued?

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago

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