QUESTION 4 HAS TWO PARTS (A， B) FOR A TOTAL OF 10 MINUTES.
　　The management of Rio National Corp. has now announced the signing of a new marketing agreement that will allow the company to sell its products in Southeast Asia. Sophie Delourme，an analyst at Euro-International Co.， is analyzing the effect of this announcement on her estimated value of Rio National‘s equity. She uses the H-model in her valuation process and has identified the following inputs：
　　Rio National’s earnings growth rate is expected to be 30.0 percent in 2014，declining over a five-year period to a constant growth rate of 12.0 percent in 2008 and thereafter.
　　Because of the change in risk， the required rate of return (cost of equity) for Rio National is expected to be 13.5 percent.
　　The dividend per share for 2002 was $0.20.
　　The dividend payout ratio is expected to be constant.
　　A. Calculate the estimated value of a share of Rio National‘s equity on 31 December 2002，using the H-model. Show your calculations.
　　(6 minutes)
　　Delourme presents her analysis to her supervisor and concludes：
　　“Except in rare circumstances， the H-model’s estimated value will be a close approximation to estimated values generated by multi-stage dividend growth models that
　　explicitly forecast dividends each year.”
　　B. State whether Delourme‘s conclusion is correct or incorrect. Justify your response with one reason.
　　(4 minutes)
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