Kalvin SA pays dividends that are expected to grow at 7 percent each year. These will stop in year five, at which point the company will pay out all its earnings as dividends. Next years dividend is 10 and its EPS (earnings per share) at the time will be 15.

Required

(a) If the appropriate discount rate on Kalvin shares is 9 percent, calculate its share price today. (10 marks)

(b) If Kalvin SA were to distribute all its earnings, it could maintain a level dividend stream of 15 per share. How much is the market actually paying per share for growth opportunities? (10 marks)