(4 Marks)

Nimkin Inc. has recently developed a bakery product. Due to the positive response from the customers, the company is planning to expand by investing all its earnings. This year, the firm had $2 per share as the earnings. The growth rate in these earnings is expected to be 20 percent annually until the end of year 4. Investors think that at the end of year 4, the company will pay 60 percent of its earnings as dividends. The growth rate will reduce to 4 percent. What is the value of the firms share today If the cost of equity capital is 8 percent?