Q1: Euro Tech. earned $120 million this year. They announced an annual dividend of 40% of its earnings. The Tech Company has around 30 million shares outstanding. It is expected that the company's earnings will grow at an 8% annual rate forever. The required return on their shares is 12%.

a. Calculate the current dividend per share. [4 marks]

b Calculate the expected dividend per share for next year. [4 marks]

C

Using the dividend discount model, calculate Euro Tech.'s share price today. [4 marks]

d Using dividend discount model, calculate the share price in the next 3 years. [4 marks]

ii. It has been observed that as a company announce a new issue of common stocks market value of existing equity drops. Please explain at least three possible reasons. [9 marks]