Rising Tide Inc. has been in business for the past 20 years as a builder of fine fishing boats.

The company began as a

guide. Brooks gathers financial information on Rising Tide and begins reading about the sports fishing boat manufac
cycles, reporting strong financial results during economic expansions and suffering disappointing results during econ
sports fishing has increased over the years, the high cost to charter a boat and guide for a day of fishing creates a re
continued expansion and the success of the newest design by Rising Tide, Brooks decides to use a model which can
decline as competition gains market share. Brooks believes that the three-stage dividend discount model is ideal for
exercise; the fast growth period in years 1-5, the transition phase in years 6-10, and the constant growth phase for y
model. After viewing past successful product launches in the industry, Brooks believes that Rising Tide can generate
the most recent financial year, Rising Tide reported earnings per share of $2.50. With the entrance of new designs f
decline. He expects to see a gradual reduction of earnings growth over years six through ten until Rising Tide reache
expected long-term growth rate for this industry. Brooks sees that Rising Tide is currently paying a dividend of $0.10
very low figure, but then sees that the firm is putting a lot of money back into the firm to keep up with production d
payout ratio should be 30% which it will reach gradually over the years six through ten. Brooks uses a 4.0% historica
risk premium. Brooks runs a regression of five years of stock returns for Rising Tide versus the S&P 500 using month
be 1.0 in the long-term and plans to see it transition over the period same period as earning growth and dividend p