7) Sinclair Pharmaceuticals, a small drug company, will experience extremely high growth over the next few years and will reinvest all its earnings in expanding the company over this time. Earnings of $4 per share were just reported and are expected to grow by 25% per year for the next three years. After three years of high growth, it is expected that Sinclair will payout 40% of earnings as dividends for the following 2 years. During these two years, the company will have half of the return on new investment. After this time, growth will drop to 3% and is expected to remain at 3% forever. Five years from now Sinclair will pay dividends that are 70% of its earnings. Assume that Sinclair has a beta of 1.5. The risk-free rate is 2.5% and the market's return is 7.5%. a) Calculate Sinclair's cost of capital (i.e., r)? (5 points) b) What is the return on new investment over the first 3 years for Sinclair pharmaceuticals (ie, ROE)? (5 points) c) What should the share price of Sinclair be in 5 years, immediately after paying its dividend? (10 points) d) What is Sinclair's share price today? (10 points)