The question is calculated using the discounted dividends model.

Computation of Valuations Models Section Use the following summary financial statement information and forecasts provided by TTU Value- Metrics to answer the valuation questions in this section about Hi-Flyer Corp. Actual Estimated Estimated Estimated All Per Share 31 Dec 2004 31 Dec 2005 31 Dec 2006 31 Dec 2007 EPS 4.50 5.25 3.60 4.80 DPS 1.10 1.50 1.80 2.00 BVE (year end) 25.00 CFFO 5.00 6.00 1.00 6.00 CFFI -3.00 -2.50 -4.00 -5.00 CFFF -2.00 -4.00 2.00 2.00 BV Liabilities 25.00 Ke 0.10 Kd 0.05 WACC 0.0 CFFO = Cash Flow from operating activities CFFI = Cash Flow from investing activities CFFF = Cash Flow from financing activities 1. Using the TTU Value-Metrics forecasts, determine the intrinsic value of High Flyer shares. Use the discounted dividends model; assume the forecast dividend payment in 2008 is $2.25 and that is will growth by 4% per year in perpetuity. The appropriate intrinsic value is: a. $29.95 b. $37.50 C. $41.85 d. $26.85 e. $35.35