Total mark: 7 (Please show all workings)

a. Moriarty Co Ltd has been growing at a rate of 6.5% for the past 4 years, and the companys CEO expects the company to continue to grow at this rate for the next several years. The company has just paid a dividend of $3.05. If your required rate of return was 10%, what is the maximum price that you would be willing to pay for this companys shares? (round to 2 d.p.) (3 marks)

b. Sherlock Ltd is planning to pay a dividend of $2.80 next year. The expected share price a year from now is $30.80. The required rate of return is 12%. Assume a constant growth, what is the current price of this share? (round to 2 dp) (4 marks)