Nakamura has earnings of £10 million and is projected to grow at a constant rate of 5 per cent forever because of the benefits gained from the learning curve.

Currently all earnings are paid out as dividends. The company plans to launch a new project 2 years from now that would be completely internally funded and require 20 per cent of the earnings that year. The project would start generating revenues one year after the launch of the project, and the earnings from the new project in any year are estimated to be constant at £5 million. The company has 10 million shares outstanding. Estimate the value of Nakamura. The discount rate is 10 per cent.