Q.No.2. (Marks 2+2+1=5)

1. The Best Cement Company is a company listed on Pakistan Stock Exchange from the last five years. The company currently pays a dividend of $1.60 per share on its common stock. The company expects to increase the dividend at a 20 percent annual rate for the first three years and at a 13 percent rate for the next three years, and then grow the dividend at a 7 percent rate thereafter. This phased-growth pattern is in keeping with the expected life cycle of earnings for eight years. You require a 16 percent return to invest in this stock. What value should you place on a share of this stock?
2. Suppose The Best Cement Company had a free cash flow of $200 million at the end of the most recent year. Free Cash Flows (FCFs) are expected to grow at a constant rate of 5% per year forever. lets assume that the WACC is 9%. The present value of the expected future free cash flows is the PV of a growing annuity. Estimate stock valuation by using free cash flow approach.
3. The Best Cement Company issues different types of common stocks, briefly discuss any two with examples.