Gold Coast Constructions was founded nine years ago by siblings Elise and Paul Nelson. The company constructs prestige homes in the Gold Coast region of Queensland. The company has experienced rapid growth because a number of celebrity customers need to build their homes on the new canal developments. The business is equally owned by Elise and Paul. The original agreement gave each sibling 50,000 shares.

Last year, the company had an earnings per share of $4.32 and paid a dividend to Elise and Paul of $54,000 each. The company also had a ROE of 25%. The siblings believe that 20% is an appropriate required return for the company. The following is the information about main competitors and industry average:

	Earnings per share	Dividend per share	Share Price	ROE	Required Return
Competitors:
Aaron Cool Homes	$0.82	$0.16	$15.19	11%	10%
Celebrity Homes	1.32	0.52	12.49	14%	13%
Expert Homes	0.97	0.40	11.47	14%	12%
Industry Average	1.04	0.36	13.05	13%	11.67%

(a) What is the value per share of Gold Coast Constructions shares?

(Hint: assume constant dividend growth rate model.)

(b) Due to the COVID19 recession, you believe that the company will not be able to sustain the required return and growth rate. What is your estimate of the share price if the industry average required return and growth rate are used? Show calculation.

(c) Share valuation is less predictable than bond valuation, do you agree with this statement? Why and why not?