I would greatly appreciate it if someone could answer questions 4 please

81476_FIN41700 X 83119 FIN41700 X SUCD Connect X FIN41700 Solutix Past Papers UC X s University 1700.pdf 6/7 SECTION B'- Choose any two of these three questions Question 4 - Share Values a. Ordinary shares are valued using a combination of balance sheet book values, price- earnings ratios of comparable companies, and expected future dividends. Describe each approach. Include a detailed explanation of the Dividend Discount Model and an assessment of any assumptions that are implicit in this model. (10 Marks) b. Demonstrate how the dividend model may be expanded to allow for the impact of expected future growth rates. Include an explanation as to how a sustainable growth rate might be determined, and describe how the present value of future growth opportunities should be estimated. Explain the circumstances when it will be desirable to plowback earnings, rather than pay a dividend. (10 Marks) c. Galaxy Air, previously a no-growth firm, has two million shares outstanding. Until now, it consistently earned 20 million per year on its assets. (It has no debt and pays out all earnings as dividends. Its cost of capital is 10 percent.) Due to its newly appointed CEO, Galaxy Air is now able to squeeze out 1 percent annual growth by a plowback of five percent of earnings. Calculate its price per share. (10 Marks) Question 5 - Investment Criteria a. Describe the Internal Rate of Return method of investment appraisal. Although clearly an attractive measure, as it offers a percentage rate of return on proposed investments, there are potential serious pitfalls associated with its application. Describe these 81476_FIN41700 X 83119 FIN41700 X SUCD Connect X FIN41700 Solutix Past Papers UC X s University 1700.pdf 6/7 SECTION B'- Choose any two of these three questions Question 4 - Share Values a. Ordinary shares are valued using a combination of balance sheet book values, price- earnings ratios of comparable companies, and expected future dividends. Describe each approach. Include a detailed explanation of the Dividend Discount Model and an assessment of any assumptions that are implicit in this model. (10 Marks) b. Demonstrate how the dividend model may be expanded to allow for the impact of expected future growth rates. Include an explanation as to how a sustainable growth rate might be determined, and describe how the present value of future growth opportunities should be estimated. Explain the circumstances when it will be desirable to plowback earnings, rather than pay a dividend. (10 Marks) c. Galaxy Air, previously a no-growth firm, has two million shares outstanding. Until now, it consistently earned 20 million per year on its assets. (It has no debt and pays out all earnings as dividends. Its cost of capital is 10 percent.) Due to its newly appointed CEO, Galaxy Air is now able to squeeze out 1 percent annual growth by a plowback of five percent of earnings. Calculate its price per share. (10 Marks) Question 5 - Investment Criteria a. Describe the Internal Rate of Return method of investment appraisal. Although clearly an attractive measure, as it offers a percentage rate of return on proposed investments, there are potential serious pitfalls associated with its application. Describe these