b

Q2. This year SCM Bhd announced a dividend of RM3 per share as an appreciation to their shareholders who have supported them over the years. Recently, an investment firm reported that the company's annual dividends should grow at the rate of 10% per year for the next 4 years. However, the growth rate will decrease at a rate of 6% a year thereafter, due to the forecasted economic turmoil affecting the industry. Given the risk free rate and the market return are 4% and 8% respectively. If the beta of the company is 2 times that of the market, analyze what is the maximum price you would be willing to pay for this stock? (16 marks)