On January $1,$ Year $1,$ you are considering the purchase of TopForm Enterprise$$ shares, based

on your analysis of TopForm$$ Enterprises, you obtain the following information

Year Net Income

$132$

$244$

$380$

$4160$

$5120$

$1.$ The Book value of equity on January $1($beginning period$),$ Year $1,$ is $ $100$ per share.

$2.$ Nick is not expected to pay dividends. The total amount will be reinvested and added

to equity.

$3.$ Predict the residual income per share for the year $1$ through Year $5$

$4.$ For year $6$ and continuing for all the years after, predicted residual income is $$0.$

$5.$ Required rate of return $($cost of capital$)$ is $20\%$

$($PV factors for the year $1$ through Year $5$ is $0\mathrm{.}833,0\mathrm{.}694,0\mathrm{.}578,0\mathrm{.}482,0\mathrm{.}402$ respectively$)$

a$.$ You are required to determine the purchase price per share of TopForm Enterprises$$

share as on January $1,$ Year $1,$ using the Residual Income Valuation model $($round your

answer to the nearest cent$).$

b$.$ Comment on the Strengths and limitations of this model for investment decisions.