Please help on parts C and DThe Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next fiveyears. Its latest EPS was $10.50, all of which was reinvested in the company. The firm's expected ROE for the next five years is 19% peryear, 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 investmentsis expected to fall to 14%, and the company is expected to start paying out 25% of its earnings in cash dividends, which it will continueto do forever after. DEQS's market capitalization rate is 19% per year.a. What is your estimate of DEQS's intrinsic value per share? (Do not round intermediate calculations. Round your answer to 2decimal places.)Answer is complete and correct.s 34.13Intrinsic valueb. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? (Roundyour dollar value to 2 decimal places.)Price willrisePrice in one yearBecause there is no dividend the entire return must be in capital gainsAnswer is complete and correct.19 % per year until year 6.Answer is complete and correct.S40.61byc. What do you expect to happen to price in the following year? (Round your dollar value to 2 decimal places.)Price in two yearsIntrinsic valueAnswer is not complete.d. What is your estimate of DEQS's intrinsic value per share if you expected DEQS to pay out only 25% of earnings starting in year 6?(Do not round intermediate calculations. Round your answer to 2 decimal places.)Answer is not complete.

DDM stands for the Dividend Discount Model. It is a valuation method used to estimate the intrinsic…

Answered: The Digital Electronic Quotation System…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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