Lecturer: Dr. zlem Saydar 1. Below you can find some information about the stock X. Answer the related questions based on the data. Dividend one year hence: D(1) = 3 Stock price one year hence: P(1) = 25 Annual risk adjusted discount rate: k = 12 % a) What would be the price of this stock according to the zero-growth model? (5p) b) Solve the case above with a growth rate of dividends (g) of 4 % (5p) c) Compute the expected share price in the example above after 7 years. (5p) 2. The average P/E ratio for cement stocks is 20. Oyak Cement has average risk and growth prospects compared to the rest of the industry. a) If the company has Earnings Per Share of $2.00, what would be a fair stock p (8p) b) If the company has 140,000,000 shares outstanding, what would be a fair m capitalization for Oyak? (7p)