Part A) The Yasnaya Company has recently discovered a type of rock which, when crushed, is extremely absorbent.It is expected that the firm will experience (beginning now) an unusually high growth rate (15%) during the period (3 years) when it has exclusive rights to the property where this rock can be found.However, beginning with the fourth year the firm's competition will have access to the material, and from that time on the firm will assume a normal growth rate of 5% annually.During the rapid growth period, the firm's dividend payout ratio will be relatively low (10%), to reserve funds for reinvestment. However, the decrease in growth will be accompanied by an increase in dividend payout to 50%.Last year's earnings were $3.00 per share (E0) and the firm's cost of equity is 14%.What should be the current price of the common stock?

Part B) Due to recent economic downturn where most of the corporates reporting a sluggish results and IMF/ADB and Moody's are revised down their growth expectations for the entire globe along with Pakistan in that circumstances if high growth rate shrinks to 7% and perpetual growth rate at 2% then how it will impact on the firm's cash flows (dividends).

Instructions:

You are required to calculate the intrinsic value of each part and then compared the calculated prices along with logical reason about the cashflows deterioration due to economic turmoil.