AstraZeneca Inc. has never paid a dividend, but the new company president has announced that the firm will pay its first dividend exactly two years from now. That dividend is expected to be R4 per share. It is anticipated that this dividend will grow by 15% for the following three years and then grow by 10 percent for the 2 years after that. No explicit dividend forecast is available at this point in time, although the firm is expected to pay dividends every year. The stocks current P/E multiple is 15. The company (and investors) expect the P/E multiple to remain constant for the foreseeable future. Earnings per share at the end of year 6 is expected to be R7. The companys marginal tax rate is 40%, and the firm has a capital structure consisting of 40% debt and 60% equity. The required rate of return is 15%.

Required:

a) Calculate the firm's intrinsic value? Show all workings. Assume a trailing P/E ratio when calculating the terminal value. (10)