Part $1$

Holcast Limited manufactures consumer products for a mature product market. As such, its growth

rate is fairly minimal and expected to be only $2\mathrm{.}0\%$ per annum. The company has just paid a dividend

of $50\mathrm{.}57$ per share. The company has a beta of $0\mathrm{.}9,$ while the current risk$-$fice rate is $4\mathrm{.}1\%$ and the

expected market risk premium is $6\%.$

a$)$ Calculate the share price for Holcast Limited.?

Part $2$

In the past year a small team have been working on a revolutionary new manufacturing process that

will impact on the overall quality and production of the company's core product range. The system is

now ready to be implemented. The efficiencies gained over the two $(2)$ years will see the net cash

flows of Holeast Limited grow by $15$ percent in each of the two years. The dividends are expected to

increase by $15$ percent in each of the next two years and thereafter dividend growth will drop back to

Holcast's normal long$-$run growth.

b$.$ Now, recalculate the share price of Holcast Limited given this new information. Assume that the

required return calculated in Part $1$ above remains the same.

$(4$ Marks$)$