Instructions to Candidates: Answer ALL questions. This examination is worth 100 marks. Question 1 (25 marks) Sisters Corp. pays a current (annual) dividend of $5, and dividends thereafter are expected to grow at the constant rate of 5% per year. The risk-free rate is 5%, and the expected return on the market portfolio is 15%. The stock has a beta of 0.50. The two competitors of Sisters Corp. are Brothers Corp. and Daughters Corp... Brothers Corp. has a stock price of $80.00 and the earnings per share (EPS) of $5.00. Daughters Corp. has a stock price of $60.00 and the earnings per share (EPS) of $3.00. Sisters Corp. has expected EPS of $6 next year. Required: a) What is the market capitalization rate of the stock of Sisters Corp. (i.e., the expected return on this share)? (5 marks) b) What is the intrinsic value of the stock of Sisters Corp. using dividend discount model? What recommendation (buy, sell, hold) would you make to the investors? (10 marks) c) What is the intrinsic value of the stock of Sisters Corp. using price to earnings ratios model? What recommendation (buy, sell, hold) would you make to the investors? (10 marks)