Task 3: (6 Marks)

Casio Travels forecasts to pay a OMR 93 dividend next year, which represents 100% of its earnings. This will provide investors with a 12% expected return.

Instead, we decide to plow back 35% of the earnings at the firms return on equity of 18%.

What is the value of the stock before and after the plowback decision? Compare and comment on the results.