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QUESTION 2 (10 marks) a) Belinda Best is interested in valuing and potentially buying shares...

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QUESTION 2 (10 marks) a) Belinda Best is interested in valuing and potentially buying shares in Big Sky Ltd, which is growing at a constant rate of 8 percent per annum. Last year, the company paid a dividend of $1.15. The required rate of return is 15.25 percent per annum. i. What is the current price of Big Sky's shares? (1 mark) ii. What would be the price of Big Sky's shares in 5 years? (1 mark) b) Health Sure Ltd is a quick growing health care firm. Rapid growth of 30% is projected for the next two years, then a growth rate of 17% for the following two years. Beyond this, the firm anticipates a constant growth rate of 8%. The firm expects to pay its first dividend of $2.46 one year from today. The required rate of return (or cost of capital) is 18% and the market price of the firm's shares is $40 per share. The firm has asked you to conduct a share price valuation: i. What should the current price of Health Sure's shares be? (5 marks) ii. Based on your valuation, are the firm's shares fairly valued? Explain

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