2. You have been approached to place a value on the equity stock of KAE Trading company Ltd. You have gathered information for the valuation exercise: Exhibit A. Historical dividends of KAE Year Dividend per share GHS 0.97 2015 2014 GHS 0.84 2013 GHS 0.81 2012 GHS 0.79 2011 GHS 0.76 Exhibit B. Historical market price of KAE Year Price per share 2015 GHS 24 2014 GHS 22 2013 GHS 27 2012 GHS 25 2011 GHS 23 Exhibit C. Financial results of KAE 2017 2016 Sales revenue Cost of goods sold Gross margin Operating expenses Net operating income Less interest expense Net income before tax Tax GHS'm 180.0 (99.0) 81.0 (28.0) 53.0 (0.6) 52.4 GHS m 158.0 (89.0) 69.0 (24.0) 45.0 (0.8) 44.2 (10.8) 33.4 (13.5) 38.9 Net income GHS'm 2.5 GHS'm 2.1 8.0 8.5 Depreciation charges Capital expenditure Net working capital Long-term debt Shareholder's fund 2.9 1.6 3.5 4.0 130.0 120.0 50.0 50.0 Shares outstanding Additional information: 1. The beta of the equity stock of KAE is 1.8 2. The interest rate on the 10-year government bond is 15% 3. The return on the market portfolio is expected to be 18% Required. C. e. a. Estimate the growth rate in dividend based on the historical dividends b. Estimate the growth rate in the firm's earnings using the Gordon's approximation Estimate the company's cost of equity using the Gordon's dividend growth model d. Estimate the company's cost of equity using the capital asset pricing model Estimate the after-tax cost of debt f. Estimate the weighted average cost of debt g. Calculate the value per share of the equity stock of KAE using the following models i. Earnings capitalization assuming earnings will grow by the growth in earnings obtained in (b) every year to perpetuity and the cost of equity is as obtained in (d) ii. Discounted dividends assuming dividend will grow by the growth rate you obtained in (a) every year to perpetuity iii. Discounted dividends assuming dividend will grow by 15% over the next three years, 10% in the following two years and 5% thereafter to perpetuity. iv. Free cash flow to equity (FCFE) assuming cash flows will grow by 3% and the ost of equity obtained in Free cash flow to firm (FCFF) assuming cash flows will grow by 3% and the cost of equity obtained in (d). V