1. Omega Company Limited will pay a dividend of KShs. 8 per share at the end of year one. The dividends are expected to grow at a constant rate of 5% per annum. The current price per share is KShs. 180. Par value per share is KShs. 50.

Required:

1. The required rate of return (3 marks)
2. The percentage change in price if the required rate of return remain constant, but the estimated dividends growth rate increases to 6.5% per annum (3 marks)

iii. The implied dividend payout ratio at the end of year one, if the annual dividend growth rate remain at 5% per annum, the required rate of return remains constant but the price is KShs. 25 below the initial price.