Required return = 10%

Problem #2: Stock Valuation using a Dividend Discount Model Gillette Corporation is expected to grow its dividends and earnings at various rates. The company just paid a cash dividend of $1.50 per share. The company expects to grow its dividend at 3% per year for each of the next two years, then,5% each year for each of the following two years, after which the company expects to grow at a constant rate of 8% per year indefinitely a) Use the required return from the previous problem to caleulate is the Fair Market Value (FM) of the stock now. Show a timeline of the cash flows. Show all work b.) If the stock trades at $40.00 per share now, is the stock undervalued or overvalued