QUESTION 1 (30 marks) a) The expected dividend of XYZ Ltd is $2.45 at the end of the year. After that the dividend is expected to grow at 10.8% per year forever. The cost of capital XYZ equity is 16.4%. What is the current price of XYZ stock? What is the expected price of XYZ's stock exactly in two years time? (6 marks) b) If you were to buy XYZ stock now and sell it after receiving the $2.45 dividend a year from now, what is the expected capital gain in percentage terms? What is the dividend yield, and what is the total rate of return on the investment? (9 marks) c) The current price of ABC Ltd stock is $234.18, and its price-earnings ratio is 53.76. Cost of capital for ABC equity is 18%. What is the present value of growth opportunities for ABC? What percentage of the current stock price does present value of growth opportunities represent? (8 marks) d) Suppose that CCC Ltd does not pay any dividend, but you forecast that CCC will pay a dividend of $3 starting 4 years from today and that the dividend will grow at 4% per year forever afterwards. Cost of capital for CCC is 9% per year. What is your forecast of the current price of CCC stock? (7 marks)