Question $5(12$ marks$)$

Suppose Firm A has $1,000,000$ outstanding shares of common stock, and there are $1,000$ shares in each lot of the stock $($i$.$e$.,1$ lot $=1000$ shares$).$ The dividend$-$payout ratio of Firm A is constant at $40\%$ each year. Net profit is currently $$20,000,000,$ and the firm has just paid dividend. Assume that the risk$-$free rate is $3\%$ and the risk premium for the share of Firm A is $7\%.$

a$)$ Calculate dividend per share this year. $(3$ marks$)$

b$)$ Calculate the required return rate for the stock.

$(2$ marks$)$

c$)$ If the sustainable growth rate of dividend is $2\%,$ what is the expected price of a share? $(5$ marks$)$

d$)$ If the current price of a share is at $$200,$ justify your investment decision with one sentence.

$(2$ marks$)$