Janet Ludlow firm requires all its analysts to use a two-stage dividend discount model (DDM) and the capital asset pricing model (CAPM) to value stocks. Using the CAPM and DDM, Ludlow has valued...

Janet Ludlow firm requires all its analysts to use a two-stage dividend discount model (DDM) and the capital asset pricing model (CAPM) to value stocks. Using the CAPM and DDM, Ludlow has valued QuickBrush Company at $63 per share. She now must value SmileWhite Corporation. a. Calculate the required rate of return for SmileWhite by using the information in the following table:

b. Ludlow estimates the following EPS and dividend growth rates for SmileWhite:

Estimate the intrinsic value of SmileWhite by using the table above, and the two-stage DDM. Dividends per share in the most recent year were $1.72.

c. Recommend QuickBrush or SmileWhite stock for purchase by comparing each company’s intrinsic value with its current market price.

d. Describe one strength of the two-stage DDM in comparison with the constant-growth DDM.

Describe one weakness inherent in all DDMs.