Using the information in Exhibit 7.4 for NewFangled Sports Products, Inc., calculate the new NPV of a share of stock if the perpetual growth rate doubled from 4% to 8%. Additionally, if the terminal year dividend payment increased from $1.40 to $2.80, what is the new share price?

EXHIBIT 7.4 Valuation of stock.

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2 ABCDE F NewFangled Sports Products, Inc. G HO P Q R T U 3 Valuation of Stock 4 5 Value of Stock Based on Dividend Payments 6 7 8 Projected 9 FYE FYE FYE FYE 10 Current Year CY-1 CY+2 CY+3 FYE CY+4 Terminal Year 11 12 1 Expected Dividend Payment Per Share $1.00 $1.10 $1.15 $1.20 $1.30 $1.40 13 14 2 Discount Period in Years 0.00 1.00 200 3.00 4.00 15 a Discount Factor 1.0000 0.8993 0.8087 0.7273 0.6540 0.6540 16 b Discount Rate 112% 17 Perpetual Growth Rate 4.0% 18 d Terminal Value* $19.44 19 20 Present Value-Cash Flow/Terminal Value $1.00 $0.99 $0.93 $0.87 $0.85 $12.72 21 22 Net Present Value $17.36 27 28 Notes 29 Reflects end-of-year discounting convention. 30 31 32 Based upon the Cost of Equity Capital as reported in Ibbotson's Cost of Capital Yearbook (data through June 2012) for SIC 3949. Based upon estimated long term cash flow growth rate of the economy in general. *Terminal Value = Terminal Year Cash Flow/ (Discount Rate-Perpetual Growth Rate)