A Berhad just paid dividend of RM 2 on its stock. Below are the expected growth of dividend per share from year 1 to year 4. At year 5, dividend is expected to grow 5% per year, indefinitely. The beta of the company is 1.2. Market risk premium is 10% and risk free rate is 3 %. Calculate the current fair value of PA Berhad stock. If the market price of the share is RM18, should you buy the stock?

Year

Growth of dividend per share

1

10%

2

0%

3

12%

4

-2%