Question
St Lucia Green Ltd. is a company that makes eco-friendly products. It is expected that the company will achieve an EPS of AUD 10 next
St Lucia Green Ltd. is a company that makes eco-friendly products. It is expected that the company will achieve an EPS of AUD 10 next year. The companys current payout ratio is 40%. The required rate of return is 17%. Its return on equity is 23%. a) What is the share price of St Lucia Green Ltd. if it does not pursue a growth strategy? b) Suppose St Lucia Green now has a plan to pursue a growth strategy. Calculate its share price. c) What is the difference in share value between the no-growth strategy and the growth strategy that St Lucia Green implements? d) What can you conclude about this difference in relation to its growth plan?
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