Your friend Liam has told you to invest in OverTime Ltd, a public company that produces organizational tools and equipment. Liam has told you that a fair price is $71 per share, with the current market price being $65.40. You decide to utilize your valuation skills to see if Liam is correct, or if the market price is fairly priced. You identify the following information:

1. A dividend was paid out one hour ago of $0.30;

2. The next dividend of $(0.46) is expected to occur in one years’ time, and this dividend will be constantly paid every quarter for 5 consecutive dividend payments (this includes the dividend at year 1);

3. Thereafter, quarterly dividends will grow at 10% p.a. compounded semi- annually in perpetuity; and,

4. The required rate of return on equity is 12% p.a. compounded quarterly.

   Given this information, calculate:

5. Required

6. a) What is the theoretical price of OverTime Ltd? How does your answer compare to Liam’s valuation at $71 per share?
   b) Would you purchase shares in OverTime Ltd? In providing your decision, state the assumptions that allow you to compare the market value with the calculated share price.