S&P 500 Fair value

Disclosure: I do own indexed funds based on S&P 500. One of these funds is VFINX from Vanguard.

Question for today: What is the fair value of VFINX at any point in time?

My answer:
OCT 2007: $123
OCT 2008: $133
OCT 2009: $143
OCT 2010: $155

How am I basing my answer?
In 50 words or less: Take the Oct 2002 peak for VFINX and extrapolate at the historic S&P growth rate of 7.9%.

In more than 50 words:
(a) Why am I picking the Oct 2002 peak instead of bottom that month?
That is for 2 reasons:
- When stock markets bottom after an 18 month+ downturn, they usually end up overextending at their bottom. In other words, they bottom further below the fair bottom. That's theory anyway, right, so how about the 2nd reason below?
- I plotted extrapolation graphs using both, the Oct 2002 peak ($85), and the Oct 2002 bottom ($78), and compared the real values of VFINX in Oct 2003, 2004, 2005 and 2006. Not surprisingly, the extrapolation based on the Oct 2002 peak fell within 4% of the real values.

(b) How did I come up with 7.9%?
I took the S&P 500 prices from January 1950 through October 2002, and arrived at the number 7.9%. I am too lazy to figure out how to upload the graph on this blog.
NOTE: Previously, I was running with the number 10.5% derived from a starting point of 1987 (instead of 1950). However, the last 20 years have apparently been more productive than have been the years 1970-1980 which saw an annual growth of barely 3.5%! Maybe we are in that period right now - who knows. Either way, it's better to play safe by going with 7.9% annual growth rate.