QUESTION $1$

You read an analyst report that predicts that shares in Traveltrek Corp. will trade for $$51\mathrm{.}45$ exactly $1$ year from now, after paying an expected dividend of $$6\mathrm{.}86$ at the same time.

The risk$-$free rate is currently $4\mathrm{.}1\%,$ the beta of the shares is $0\mathrm{.}62$ and the market risk premium is estimated to be $8\mathrm{.}1\%.$

What is the cost of equity for the company?

$($Please answer as percentage to $2$ decimal places$)$

What is a fair price for shares today?

$($Please answer to $2$ decimal places$)$

A few days later, the company reports negative news that likely mean no dividends for the nex few years and the price target of $$51\mathrm{.}45$ will only be reached $3$ years from now, according an update from the analyst. What is the new fair price now?

$($Please answer to $2$ de

cimal places$)$

QUESTION $2$

A real estate business will grow profits available to its owners at a healthy rate of $3\mathrm{.}6\%$ indefinitely, while a fair discount rate for this type of business would be $12\mathrm{.}6\%.$ Profits to be distributed at the end of this year are expected to be $$782,500.$ You have the opportunity to buy such a business today for $$7\mathrm{.}599$ million.

$($Select from the drop$-$down menu.$)$

$($No answer given$)+$ because the business is

$($No answer given$)$

by

$

million.