Q$3$ SET $($B$)$

a$)$ Strong Limited is one of the market leaders in the Cement industry. The current EPS of

Strong Limited is Rs $20.$ Strong Limited has a dividend payout ratio of $70\%$ and return on

equity is $20\%.$ The cost of equity is $12\%.$ What would be the value of the share of Strong

Limited using the Discount dividend model?

b$)$ Explain the limitations of the discount dividend model in finding the intrinsic value of a

share? What might be a better method to find the intrinsic value? Why?

c$)$ You are interested in buying the shares of Strong Limited. Before doing so$,$ you want to

do an EIC analysis. What are the factors you would take into account while doing an

industry analysis for Strong Limited?

$($Marks:$3+2+5)$