You are an equity analyst working for an investment bank. You are analysing Company ABC shares. The last year dividend (Do) was 30 pence. You are predicting 12% dividend growth for the next 2 years and 8 % for the following 2 years, and thereafter dividend growth is assumed to slow for the foreseeable future to 4%. The required rate of return on equity is deemed to be 12%.
i. Calculate the fair value price of the share.
ii. What is the fair value of the share at the end of year 4?
