The Digital Electronic Quotation System $($DEQS$)$ Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $$15\mathrm{.}5,$ all of which was reinvested in the company. The firm$$s expected ROE for the next five years is $19\%$ per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year $6,$ the firm$$s ROE on new investments is expected to fall to $14\%,$ and the company is expected to start paying out $35\%$ of its earnings in cash dividends, which it will continue to do forever after. DEQS$$s market capitalization rate is $22\%$ per year.

a$.$ What is your estimate of DEQS$$s intrinsic value per share? $($Do not round intermediate calculations. Round your answer to $2$ decimal places. Omit the $"$$$"$ sign in your response.$)$

Intrinsic value $40\mathrm{.}51$ $

b$.$ Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? $($Omit the $"\%"$ sign in your response.$)$

The price should rise by $22\%$ per year until year $6$: because there is no dividend, the entire return must be in capital gains.

c$.$ What do you expect to happen to price in the following year?

Price in the sixth year $

d$.$ What effect would it have on your estimate of DEQS$$s intrinsic value if you expected DEQS to pay out only $19\%$ of earnings starting in year $6?($Do not round intermediate calculations. Round your answers to $2$ decimal places. Omit the $"$$$"$ and $"\%"$ signs in your response.$)$

Time

Et $ $41\mathrm{.}182$

Dt $ $7\mathrm{.}83$

b $ $0\mathrm{.}81$

g $11\mathrm{.}34\%$