You are considering investing in JouJou Ltd, a public company that manufactures bottle

openers and other kitchen tools. In considering purchasing shares in JouJou Ltd, you are

utilising your valuation skills to see if the market price is fair. Using the information below, find

the theoretical value of one share of JouJou Ltd and compare it to the current market price of

$42.53:

A dividend was paid out yesterday of $0.50;

The next dividend of $0.50 is expected to occur in two years time, and this

dividend will be constantly paid every six months for 6 consecutive dividend

payments (this includes the dividend at year 2);

Thereafter, dividends will grow at 6% p.a. compounded semiannually in

perpetuity; and,

The required rate of return on equity is 8% p.a. compounded quarterly and

all dividends are paid out semiannually.

Would you purchase JouJou Ltd? In providing your decision, you may need to state some

assumptions that allow you to compare the market value with the calculated share price.