You are considering an equity investment in Infinity Ltd, a company listed on the Examland Stock Exchange. Infinity has 350 million shares outstanding, which are currently traded at $36 per share. Infinity just paid a dividend of $1.2 per share. The company maintains a 40% dividend payout ratio over time. You forecast the companys ROE on reinvested earnings will stay stable at its current level. Your earnings per share forecasts for next year is $3.45. Infinity has an equity beta of 2 based on its past performance. The market risk premium is 6%. The yield to maturity on 10 year government bonds is 6% per year. (a) What is Infinitys cost of equity? (b) What is Infinitys ROE on its reinvested earnings? (c) What is your dividend discount model valuation of a share in Infinity? (3 marks) (d) Whether should you invest in Infinity? Explain the reason. (e) One of your friends is an equity analyst. She thinks that Infinity is in an industry that is gradually moving into the maturity stage so Infinity is unable to maintain its current ROE on reinvested earnings. She forecasts that Infinitys ROE will decrease linearly to a stable rate of 15% (the level at the maturity stage) over the next 5 years and Infinitys equity beta should now be 1.3 instead of 2. Assume the Infinitys industry will stay at the maturity stage forever. What is the dividend discount valuation of a share in Infinity based on your friends forecast