An analyst has provided you with the following actual and forecasted financial information for Squamish Ltd.:

2020 A 2021 E 2022 E

Sales $500,000 $525,000 $540,000

Operating Profit Margin (after tax) 0.075 0.075

Financial Leverage (FLEV) 1.50 1.75 2.00

Shareholders Equity (S/E) $175,000 $190,000 $200,000

In conjunction, the analyst has also provided you with the following additional information:

• the forecasted growth rate in comprehensive income after tax (CI) after 2022 is 4%
• Squamishs net borrowing cost (NBC) after tax is 3%
• Squamishs cost of equity capital is 7%
• Squamish has 50,000 common shares outstanding

While you agree with the analysts forecasts of future sales and operating profit margins, you do not believe that the firm will change its capital structure. As such, you believe that its financial leverage ratio (FLEV) will remain at its 2020 level of 1.50 and that as a result, the appropriate cost of equity capital will be 6.5% and the net borrowing cost will be 2.5% after tax because the firm will be less risky, but that its terminal growth rate will only be 3% because its CI will grow more slowly without the benefits of the increased financial leverage.

Given this information, which of the following statements is TRUE?

	1.	Your estimate of the price of a common share of Squamish Ltd. will be the same as the analysts estimate
	2.	Based on the information provided, it is not possible to estimate the price of Squamishs common shares
	3.	Your estimate of the price of a common share of Squamish Ltd. will be lower than the analysts estimate
	4.	Your estimate of the price of a common share of Squamish Ltd. will be higher than the analysts estimate