Andys Pastries has a new hit pastry that has a magical appeal to the taste buds of its customers. Given the phenomenal market response to this product, Andys Pastries is reinvesting all of its earnings to expand its operations. Earnings were $4 per share this past year and are expected to grow at a rate of 20% per year until the end of year 3. At that point, other companies are likely to bring out competing products. Analysts project that at the end of year 3, Andys Pastries will cut its investment and begin paying 60% of its earnings as dividends. Its growth will also slow to a long-run rate of 5%.

If Andys Pastries equity cost of capital is 8%, what is the value of a share today?

[15 marks]