As an energy analyst, you are valuing the stock of an oil exploration company. You have projected earnings and dividends three years out (to t = 3), and you have gathered the following data and estimates:

• Required rate of return = 0.10.

• Average dividend payout rate for mature companies in the market = 0.45.

• Industry average ROE = 0.13.

• E₃ = \($3.00\) 

• Industry average P/E = 14.3.

On the basis of this information, carry out the following:

i. Calculate terminal value based on comparables, using your estimated industry average P/E as the benchmark.

ii. Contrast your answer in Part 1 to an estimate of terminal value using the Gordon growth model.