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a) Fiona Fitzsimmons is interested in valuing and potentially buying shares in Orange Ltd, which...

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a) Fiona Fitzsimmons is interested in valuing and potentially buying shares in Orange Ltd, which is growing at a constant rate of 9.20 percent per annum. Last year, the company paid a dividend of $1.20. The required rate of return is 15.80 percent per annum. i. What is the current price of Orange's shares? (1 mark) 11. What would be the price of Orange's shares in 4 years? (1 mark) b) Jungle Ltd is a quick growing sports leisure firm. Rapid growth of 20% is projected for the next two years, then a growth rate of 15% for the following two years. Beyond this, the firm anticipates a constant growth rate of 10%. The firm expects to pay its first dividend of $2.50 one year from today. The required rate of return (or cost of capital) is 15% and the market price of the firm's shares is $50 per share. The firm has asked you to conduct a share price valuation: i. What should the current price of Jungle's shares be? (5 marks) ii. Based on your valuation, are the firm's shares fairly valued? Explain (3) marks)

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