Please answer question 28 through 36 and show calculations if possible. Thank you.

Chapter 7 Discounted Dividend Valuation 375 The following information relates Questions 28-36 Gianna Peters is an investment analyse who focuses on dividend paying socia Peters uses a dis- counted cash flow (DCF) approach to mock lection. She is meeting with her staff to evaluate portfolio holdings based on a bottom-up screening of toda listed in the United States and Canada Peters and her staff begin by teviewing the characteristics of the following portfolio candidato Company ABC A Canadian company in the consumer staples sector with a required rate of return of 7.35% Recent media reports suggest that ABC might be a takeover candidate. Peters and her team estimate that if the incumbent Canadian prime minister's party retains its power, the compa my's current annual dividend of C$0.65 per share will grow 12% a year for the next four yean and then stabilire at a 3.5% growth rate a year indefinitely. However, if a new government takes office in Canada, then the team estimates that ABC will likely not experience the elevated 12% short-run growth because of new regulatory and exchanges, and instead will grow by 3.5% indefinitely Company XYZ Amidsired US company in the utilities sector with a required rate of return of 10%. Peters and her team believe that because of a recent restructuring, the company is unlikely to pay dividends for the next three years. However, the team expects XYZ to pay an annual dividend of US$1.72 per share beginning four years from now. Thereafter, the dividend is expected to grow indefinitely at 4% even though the current price implies a growth rate of 6% during this same period. Company J2Y A large US company in the telecom sector with a required rate of return of 8%. The stock is currently trading at US$32.76 per share with an implied earning growth rate of 5.3%. Peters believes that because JZY is mature and has a stable capital structure, the company will grow at its sustainable growth rate. Over the past 10 years, the company's tetumn on equity (ROE) has averaged 8.17% and its payout ratio has averaged 40%. Recently, the company paid an annual dividend of US$0.84 per share. Peters as a newly hired analyst, Kurt Thomas, to comment on the evaluation approach for these three stocks. Thomas makes the following statements 1. A free cash flow valuation model would not be appropriate to evaluate Company ABC the firm becomes a takeover candidate. 2 A dividend discount model cannot be applied to Company XYZ If dividends are suspend- ed for a few years. 3. A dividend discount model is suitable for evaluating the stock of Company JZY became of the historically consistent payout ratio Peters then asks the team to examine the growth opportunities of the Canadian stocks currently held in the portfolio. These stocks are listed in Exhibit 1. Peters believes that the stocles are fairly valued Equity Asset Valuation 376 Current Price per Shure CS EXHIBITI Selected Stock Characteristics Required Rate Next Year's Stock of Return Forecasted EPS (C5) ABTD 10.5 7.30 8.ON CPMN 12.0 1.90 80.00 39.00 27.39 BKKO 28. Which of the following statements made by Thomas is correct? A Statement ! B. Statement 2 C. Statement 3 29. Assuming the incumbent government retains office in Canada. Peters and her team csi mate that the current value of Company ABC stock would be closest to A C$22.18, B. C$23.60 G. C$25.30 30. Assuming a new government takes office in Canada, Peters and her team estimate that the current intrinsic value of Company ABC would be closest to: A CS9.15 B. CS16.88. C. C$17.47 31. Assume that a new government takes office in Canada. If Peters and her team use the Gordon growth model and assume that Company ABC stock is fairly valued, then which of the following would most likely be true? A. The total return of ABC stock will be 10.85%. B. The dividend yield of ABC stock will be 3.85% C. The stock price of ABC will grow at 7.35% annually, 32. If the team uses the dividend discount model, the current intrinsic value of Company XYZ stock would be closest to: A. US$19.58 B US$20.36. C. US$21.54. 33. The dividend growth rate implied in the stock price of Company XYZ suggests that XYZS stock price is most likely A undervalued. B. fairly valued. C. overvalued 34. Based on the relationship between the implied growth rate and the sustainable growth rate, Peter's team should conclude that Company JZY's stock price is most likely A undervalued B. fairly valued C. overvalued 35. Based on Exhibit 1, the stock with the largest present value of growth opportunities (PVGO) is: A ABTD. B. BKKO C. CPMN Chapter 7 Discounted Dividend Valuation 377 36. Based on Exhibit 1, the growth component of the leading P/E is largest for: A. ABTD. B. BKKQ. C. CPMN