Subject- Finance Math

Question 2 High Growth Company An analyst is trying to value a high growth company. Zara INC. He has collected the relevant data found on the table below: Growth [for the first 5 years) 32% Growth [indefinite] 5% TSX index Jan 1, 2015 12542 Risk free rate 2.5% Beta 1.7 TSX index Dec 31, 2015 13950 Dividend payout 55% Net income $150,000 # of Shareholders 75000 Market Price $150 a) Calculate cost of capital [using CAPM b) Find D1, D2,D3 c) Find D4 d) Calculate V3 using D 4 e) Discount D1, D2,D3 and V3 f) Calculate share price. g) Is the share overvalued or undervalued ? [25 marks)