Question 3 (30 marks) a) KEF Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product Management expects earnings and dividends to grow at a rate of 20% for the next 3 years, after which competition will probably reduce the growth rate in earnings and dividends to 10% and its constant forever. The company's last dividend, Do, was $1.25, its beta is 1.20, the market risk is 14.00%, and the risk-free rate is 3.00%. What is the current price of the common stock? (10 marks) b) A company has been growing at a fast rate of 35% per year recently and this growth rate is expected to last for another two years. Thereafter, the growth rate is expected to decline to a sustainable rate of 5%. i) If the most recent dividend paid is RM1.20 and risk-free rate is 3%, market risk premium 6% dan beta is 1.5, how much is the stock worth today?) (15 marks) ii) Based on the calculation in (a), would you buy the share if the stock is selling at RM25 today? Is the share overvalued or undervalued?)