Can you please solve this manually and share your workings? Thanks! Rising plc has been...
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Can you please solve this manually and share your workings? Thanks!
Rising plc has been re-investing 70% of earnings into a project that yields a return of 14%. The dividend yield is expected to be 4% over the next year. The company has a current price of 100 per share.
Required:
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(a) Assume that the company can continue to plowback at this rate and earn 14% on the investment. How rapidly will the earnings and dividends grow? What is the market required rate of return?
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(b) What is the present value of the growth opportunities of Rising Plc?
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(c) Rising plc announces that it will re-invest 90% of its earnings for the next 4 years. Starting in Year 5, the company will again be able to pay out 30% of its earnings. What
will be Risings share price once this announcement is made?
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