QUESTION:

a$)$ Sweetheart Plc paid a dividend of $K250,000$ this year. The current return to shareholders of companies in the same industry as Sweetheart PIc is $12\%,$ although it is expected that an additional risk premium of $2\%$ will be applicable to Target, being a smaller and unquoted company. Compute the expected valuation of Sweetheart Plc$,$ if:

i$)$ The current level of dividend is expected to continue into the foreseeable future.

ii$)$ The dividend is expected to grow at a rate of $4\%$ pa into the foreseeable future.

iii$)$ The dividend is expected to grow at a $3\%$ rate for three years and $2\%$ afterwards.

$(9$ marks$)$