5. Your friend holds 1,000 shares of the ordinary stock of Black Boy Ltd. Currently, each share is trading at GHS1.55 on the stock exchange. The recent dividend to shareholders is GHS0.15 per share. Her required rate of return on this ordinary stock is 14 percent.

Required:

a) Assuming the same amount of dividend will be paid every year ad infinitum, what value would your friend place on a share of this ordinary stock? Is the share fairly valued by the market? Would it be profitable for your friend to sell your shares now?

b) Assuming dividends grow at 5 percent every year ad infinitum, what value would your friend place on a