THE GROWTH  RATE IS 6.252 The following assumptions apply to the Benton Inc. stock: 3 Benton Inc. expects to grow at its currently indicated sustainable growth rate for the foreseeable future. The company's board of directors has indicated that it plans to grow dividends at the growth rate experienced in the overall business. Use the 2018 values of the items in the table below as the basis to project their 2019 amounts. (10 points) a. Actual Benton Inc. 2019 2018 Earnings per share $1.875 Dividends per share $0.750 Reinvested earnings per share $1.125 Book value per share $18.000 Return on equity (ROE) 10.4167% Supporting Calculations Required: b. Use the appropriate dividend discount model to compute the intrinsic value of the Benton Inc. stock at December 31, 2018 and indicate whether the stock is properly valued at its current price Intrinsic Value of Benton Inc. stock (6 points) Supporting Calculation Required: Is the Benton Inc. stock overvalued or undervalued at December 31, 2018? (2 points) Brief Explanation Required: Use the discounted cash flow formula to calculate the rate of return implied by the current market price of the Benton Inc. stock C. Implied Rate or Return of Benton Inc. stock (4 points) Supporting Calculation Required: The following information was 31, 2018: compiled relative to two companies and their common stock at December All values in millions except per share data and %'s Anders Corp. Benton Inc Current stock price $15.00 $30.00 Beta 1.1 0.8 2.50% Dividend yield 1.80% Fiscal Year 2018: $180.000 Net sales $22.000 Interest expense 0.400 12.000 Income before taxes 2.250 23.077 Income tax expense 1.200 8.077 Net income $1.350 $15.000 $0.675 Earnings per share $1.875 Shares 2.000 8.000 $1.620 Operating cash flows $22.500 Capital expenditu res (9.000) (0.320) Net borrowings (0.410) (5.630) 320.00 Total assets 40.00 Total equity 144.00 12.00 The risk-free rate is 3.6% and the expected return on the market is 9.6%.

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