Satu Lagi Ltd (SLL) is currently in a period of strong growth. Earnings and dividends are expected to continue to grow at a rate of 10% during the next two years, 8% in the third year, and then at a constant rate of 6% thereafter. SLL had just paid a dividend of $0.115 per share.

(a) What would the estimated price of one SLL share be after 3 years?

(b) What would the price of one SLL share be today?

The share of San Rimo Ltd (SRL) is trading at $20 per share. SRL has a Beta of 1.5 in a share market with a historic overall return of 12%. The benchmark Government bond is currently yielding 4%.

(c) What is the rate of return expected by investors in an SRL share?

(d) If SRL constantly pays dividends with a yield of 6% per year, what will the estimated price of one SRL share be after five years?