F Ltd manufacturing is considering a cash purchase of the stock of Gujrat Hardwares. During the year just completed, Gujrat earned $10 per share and paid cash dividend of $4 per share. Gujrat earnings and dividends are expected to grow at 25% per year for the next 4 years, after which they are expected to grow at 12% per year to infinity. What is the maximum price per share F Ltd should pay for Gujrat Hardwares if it has a required return of 18% on investment with risk characteristics similar to those of Gujrat Hardwares? a) Discuss stock valuation models. b)Compute fair price per share using dividend discount model and discuss under what circumstances its a good investments.