Finance

Q1

Q2

Date	Sales
39933	14833
40025	15067
40117	15276
40209	20181
40298	15593
40390	15532
40482	15605
40574	20661
40663	15935
40755	16240
40847	16402
40939	21288
41029	16867
41121	16779
41213	16929
41305	22726
41394	16706
41486	17117
41578	17258
41670	21515
41759	17050
41851	17406
41943	17732
42035	21751
42124	17119
42216	17427
42308	17613
42400	21626
42490	16196
42582	16169
42674	16441

Q3

	Bob's Rawhide Company
	EPS	1.25		C)	ROE	0.0	0.0 Timothy R. Mayes, Ph.D.: Timothy R. Mayes, Ph.D.: I've used a custom number format here to hide the formula and label the column.
	Payout Ratio	65%			10%
	ROE	11%			11%
	Required Return	8%			12%
					13%
A)	Growth Rate				14%
					15%
	Value without Growth				16%
	Value of Growth Opportunities				17%
B)	Value of Stock				18%
					19%
D)	Constant Growth DDM Value				20%
					21%
					22%
					23%
					24%
					25%
					26%
					27%
					28%
					29%
					30%
			D) Using the constant growth model
					ROE	Value
					10%
					11%
					12%
					13%
					14%
					15%
					16%
					17%
					18%
					19%
					20%

Stock Value as ROE Rises

Value 0.1 0.11 0.12 0.13 0.14000000000000001 0.15000000000000002 0.16000000000000003 0.17000000000000004 0.18000000000000005 0.19000000000000006 0.2 0000000000000007 0.21000000000000008 0.22000000000000008 0.23000000000000009 0.2400000000000001 0.25000000000000011 0.26000000000000012 0.27000000000000013 0.28000000000000014 0.29000000000000015 0.30000000000000016

Return on Equity

Stock Value

The model breaks down once the growth rate is greater than or equal to the required return. When this happens, the value of the stock becomes negative, which doesn't make economic sense due to the limited liability of shareholders.