1 You have been asked by a client to forecast the dividend per share of Clouds plc over the next three years.

From initial investigation, you find out that the company paid a dividend of £1.00 per share last year.

An examination of analysts’ earnings forecasts points to an expected earnings per share of £3 next year, which is an increase from the current earnings per share of £2.75. The earnings per share two years from now are expected to be £3.50. Using Lintner’s model, you estimate that the company has a long-term payout rate of 60 per cent and an adjustment factor of 50 per cent. (40 marks)