RFK Limited expects earnings this year of $ $4\mathrm{.}59$ per$$ share, and it plans to pay a $ $2\mathrm{.}40$ dividend to shareholders. RFK will retain $ $2\mathrm{.}19$ per share of its earnings to reinvest in new projects which have an expected return of $14\mathrm{.}7\%$ per year. Suppose RFK will maintain the same dividend payout$$ rate, retention rate and return on new investments in the future and will not change its number of outstanding shares.$$

a$.$ What growth rate of earnings would you forecast for$$ RFK$?$

b$.$ If$$ RFK$\text{'}$s equity cost of capital is $11\mathrm{.}6\%,$ what price would you estimate for RFK$$ shares?

c$.$ Suppose instead that RFK paid a dividend of $ $3\mathrm{.}40$ per share this year and retained only $ $1\mathrm{.}19$ per share in earnings. That$$ is$,$ it chose to pay a higher dividend instead of reinvesting in as many new projects. If RFK maintains this higher payout rate in the$$ future, what share price would you estimate for the firm$$ now? Should RFK follow this new$$ policy?