Answer THREE out of FIVE questions. Question 1 a) The financial press reports that the stock market is overvalued at a near record high, based on the eamings multiplier. What does that mean to you? (15 Marks) b) The Gordon-Shapiro model: 1. Provide a brief discussion of the model. (10 Marks) 2. Discuss its implications regarding the relationship between stock (10 Marks) prices/returns, growth (g), and the required rate of return (r). 3. Discuss any issues arising when (i) g r, (ii) g r, and (m) g > r (15 Marks) c) Artemis Inc. reports the following financial ratios for 2016 and 2015. Calculate, and briefly discuss the changes, if any, on the company's return on equity from 2015 to 2016 Ratio 2015 2016 Equity multiplier 1.50 2.50 Return on assets 0.20 0.16 (10 Marks) d) Earnings forecasting and financial distress: 1. Briefly describe and contrast the following techniques used in evaluating forecasts i. Mean error (ME) ii. Mean absolute error (MABE) ii. Mean squared error (MSE) (20 Marks) 2. Introduce the concept of financial distress and offer an analysis of the various remedies available to distressed companies. (20 Marks) [Question 1: Total 100 Marks]