Question 5. FINA Company is expected to pay $4 dividend per share at the end of this year. FINAs beta is 1.2. Three months US Treasury bill yield is 2 %, and the return on the S&P 500 index is 12 %. FINA Company is expected to growth at 6% per year forever. (total 6 points)

a. How much should be the value of FINAs shares? (2 points)

b. If FINA shares are selling for $45 in the market, would you buy it? (1 point)

c. Now answer question with new numbers. Here we are given the following (3 points):

FINA Company paid $4 dividend per share last year. The cost of capital for FINA is 10 % and the company is expected to growth at 6% per year forever. How much should be the value of FINAs shares?

If FINA shares are selling for $110 in the market, is it over-valued or under-valued? Should you buy it?