Mr.Fox Mulderplans to investinthe shares of ahigh-techcompany,Satellite Building Inc (SBI).

SBIhas just paid a dividend of $30 per share and the management has indicated that it will increase the dividend payments by 20% per year for the next three years, and 10% per year thereafter.SBIhas a beta of 1.5.

The long-term risk-free interest rate is 4% and theexpected market returnis9%.

(a)Based onCapital asset Pricing Model (CAPM), compute the required rate of return onSBIshares.[Hint:Refer to the notes for the topic Risk, Return and CAPM.](3marks)

(b)Using the answer in (a), calculate the market value per share ofSBI. How much should Mr.Mulderpay for 100shares?(9marks)

(c)IfMr.Mulderdecides to sell all ofSBI sharesafter 4 years,

(i)how much will he expect to get by selling the shares?(6marks)

(ii)how much will he have in total? Assume that the dividends are reinvested at the required rate of return calculatedin(a).(7marks)