Use

the following information to answer questions 7 and 8.

Karoo Limited is selling for R330. The beta of Karoo is 0.62 and current

dividend is R7.45. The equity risk premium and the risk-free rate is 8.40% and 3%

respectively. An analyst covering the share expects Karoo’s share to grow at 22%

initially, declining linearly during a twelve-year period to a final and

perpetual growth rate of 4%.

Calculate

the value of Karoo’s dividend stream using the H-model.