Delta Company has earnings of $6.00 per share in 2019. It has decided to distribute, as dividends, one-third of its earnings. Analysts forecast that Delta would earn a return on equity of 16% on its investments. If investors required a 12% rate of return,

1.1 Calculate the actual growth rate. What is the value of Delta at the end of 2019? Explain (4 marks)

1.2. What fraction of Deltas value comes from growth opportunities? (2 marks) 1.3. Draw a table showing earnings per share, dividends, plowback, growth, and price for no growth and growth scenarios. (3 marks) 2. Suppose that Delta could only earn 8% on its investments and its payout ratio is now 80%, 2.1 Calculate the actual growth rate. What is the value of Delta at the end of 2019? (4 marks) 2.2. What fraction of Deltas value comes from growth opportunities? (2 marks) 2.3. Draw a table showing EPS, dividends, plowback, growth, and price for no growth and growth scenarios. (2 marks) 3. Based on the results obtained, provide a discussion on the relationship between the firms equity value and its reinvestment policy. (3 marks)