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Sunflower will pay a dividend of 0.8 in a year's time. The book value per share is 5 and the return on equity is 25%.

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Sunflower will pay a dividend of 0.8 in a year's time. The book value per share is 5 and the return on equity is 25%. Sunflower is valued at 10. The plowback ratio is expected to remain constant. The company is fully equity financed. a) What is the expected growth rate of dividends? b) What is the discount rate used to value the future stream of dividends? c) What are the Price-Earnings Ratio (PER) and the Present Value of future Growth Opportunities (PVGO)? What do these numbers tell us about Sunflower? d) Can you suggest a way of increasing the value of Sunflower? Identify, and explain, any assumptions you make

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