Question 1

Wayne Stevens is interested in purchasing the ordinary shares of Archers Bathroom Supplies Pty Ltd which are currently priced at $28.96. The company expects to pay an upcoming dividend of $2.02 and expects to grow at a constant rate of 6 per cent

. Required Part a) What should the market value of the share be if the required rate of return is 12 per cent? [2 marks]

Part b) Is this a good buy? Why or Why not? [2 marks]