Complete all questions below relating to Sharedspace Ltd, a listed company in the commercial real-estate industry. (a) An analyst has collected the following information and wants to estimate the value of Sharedspace's shares using the dividend discount model: • Sharedspace currently pays no dividend. • Sharedspace is expected to pay an annual dividend of $1 per share three years from today. • Sharedspace's dividends are expected to grow by 4% per year indefinitely thereafter. • The cost of equity is 8%. • The cost of debt is 5%. • The after-tax weighted average cost of capital is 6%. The marginal corporate tax rate is 30%. Using the dividend discount model and the information above, the per share value is $

Essentials Of Investments
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Chapter1: Investments: Background And Issues
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Complete all questions below relating to Sharedspace Ltd, a listed company in the commercial real-estate
industry.
(a) An analyst has collected the following information and wants to estimate the value of Sharedspace's
shares using the dividend discount model:
• Sharedspace currently pays no dividend.
• Sharedspace is expected to pay an annual dividend of $1 per share three years from today.
• Sharedspace's dividends are expected to grow by 4% per year indefinitely thereafter.
• The cost of equity is 8%.
• The cost of debt is 5%.
• The after-tax weighted average cost of capital is 6%.
• The marginal corporate tax rate is 30%.
Using the dividend discount model and the information above, the per share value is $
Note: Please provide your answer with one decimal point in the format of xx.x (for example, if the answer is $1.23,
type in 1.2).
(b) Ten brokerage firms issue independent analysts' forecasts and valuations of Sharedspace. The median of
independent analysts' valuations is $20 per share. Suppose that a Sharedspace share is trading at $22. Based
on the median of these independent analysts' valuations, Sharedspace's shares are currently ✓ Select alternative
in the market.
Reset
fairly-valued
under-valued
over-valued
Transcribed Image Text:Complete all questions below relating to Sharedspace Ltd, a listed company in the commercial real-estate industry. (a) An analyst has collected the following information and wants to estimate the value of Sharedspace's shares using the dividend discount model: • Sharedspace currently pays no dividend. • Sharedspace is expected to pay an annual dividend of $1 per share three years from today. • Sharedspace's dividends are expected to grow by 4% per year indefinitely thereafter. • The cost of equity is 8%. • The cost of debt is 5%. • The after-tax weighted average cost of capital is 6%. • The marginal corporate tax rate is 30%. Using the dividend discount model and the information above, the per share value is $ Note: Please provide your answer with one decimal point in the format of xx.x (for example, if the answer is $1.23, type in 1.2). (b) Ten brokerage firms issue independent analysts' forecasts and valuations of Sharedspace. The median of independent analysts' valuations is $20 per share. Suppose that a Sharedspace share is trading at $22. Based on the median of these independent analysts' valuations, Sharedspace's shares are currently ✓ Select alternative in the market. Reset fairly-valued under-valued over-valued
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