How do you calculate the stock price for both scenarios?

He asked Ms. Firewater to prepare a formal report
to Prairie Home stockholders, valuing the company on the
assumption that its shares were publicly traded.

Ms. Firewater asked two questions immediately. First,
what should she assume about investment and growth? Mr.
Breezeway suggested two valuations, one assuming more
rapid expansion (as in the top panel of Table 3.8) and
another just projecting past growth (as in the bottom panel
of Table 3.8).

Second, what rate of return should she use? Mr. Breezeway
said that 15 percent, Prairie Home?s usual return on book
equity, sounded right to him, but he referred her to an article
in the Journal of Finance indicating that investors in rural
supermarket chains, with risks similar to Prairie Home Stores,
expected to earn about 11 percent on average.


		      		Rapid-Growth Scenario		
				1	2	3	4	5	6
Book value, start of year	80	92	105.8	121.7	139.9 146.9
Earnings			12	13.8	15.9	18.3	21	22
Dividends			0	0	0	0	14    14.7
Retained Earnings		12	13.8	15.9	18.3	7	7.4
Book value, end of year	        92	105.8	121.7	140	146.9    154.3

				Constant-Growth Scenario	
				1	2	3	4	5	6
Book value, start of year	80	84	88.2	92.6	97.2	102.1
Earnings			12	12.6	13.2	13.9	14.6	15.3
Dividends			8	8.4	8.8	9.3	9.7	10.2
Retained Earnings		4	4.2	4.4	4.6	4.9	5.1
Book value, end of year	        84	88.2	92.6	97.2	102.1	107.2
							


Notes:
1. Both panels assume earnings equal to 15 percent of start-of-year book
value. This profitability rate is constant.
2. The top panel assumes all earnings are reinvested from 2005 to 2009.
In 2010 and later years, two-thirds of earnings are paid out as dividends
and one-third reinvested.
3. The bottom panel assumes two-thirds of earnings are paid out as
dividends in all years.
4. Columns may not add up because of rounding.