The assumptions are: Risk free rate = 2.5% Share beta = 0.60 ASX 200 (Stock market return) = 14% Dividend payout ratio = 45% Number of ordinary shares outstanding = 319490 Industry P/E1 ratio = 15 (where E1 denotes the next period's earnings) Current traded price of an ordinary share = $2.0 Current market value of interest-bearing debt = $290,000 Cost of debt = 8.5% Corporate tax rate = 30% Floatation costs = 150 basis points

Questions: a) Calculate the value of a RIC share using the constant growth model.

b) Calculate the value of Ridley's using the industry P/E1 ratio.

c) Justify the differences between the two values calculated in parts a and b, if any.

d) Calculate the weighted average cost of capital