You are using a dividend discount model to value a bank, which is expected to generate a 15% return on equity in perpetuity. The company paid dividends of $40 million on net income of $100 million in the most recent year and is expected to maintain high growth for the next 3 years, before settling into stable growth, growing 3% a year in perpetuity. If the cost of equity is 9%, estimate the terminal value at the end of year 3.

$889.25 million

$1778.51 million

$2223.13 million

$741.04 million