XYZ Company operates in the sport shoes industry and has the following information: Beta: 0.5 Current share price: $50 Current annual dividend: $1.2 per share

1. Assume that the mean of P/E (i.e., share price/earning per share) in the sport shoes sector is 20, and that EPS (i.e., earning per share) next year for XYZ company is $2, what is the estimated value per share for XYZ company using the earnings capitalisation model? Based on the estimated share value, what recommendation would you make to the share investor? Explainwhy.(10 marks)