According to the general dividend valuation model, a firm that reinvests all its earnings and pays no cash dividends can still have a common stock value greater than zero. Discuss how is this possible? (5 marks)

b. "Comparing the current stock price to the fair value range helps determine whether a stock is considered overvalued, undervalued or at fair value."

Discuss how the three different values stated in the above statement help investors make their investment decision. (9 marks)

c. Nasran is considering investing in BeeHive Bhd's stock with a two year investment horizon. He forecasted next year's dividend at RM1 per share and the second year's dividend at RM1.50 per share. Using the P/E approach, Nasran forecasted the price of BeeHive Bhd after two years at RM60. Nasran's required rate of return is 16 percent. Should he buy the shares if it is currently quoted at RM50 on Bursa Malaysia?