• Triantis Industries is a real estate developer. The firm has recently posted a Return on Equity (ROE) of 16% due to the success of some of their recent property developments. As a result, the firm retains much of its earnings, issuing dividends of just 40% of their net income. Triantis Industries has 3 million shares outstanding and their earnings next year are expected to be $1.67 per share.

a)What is Triantis dividend growth rate?

b)If shareholders require a 15% rate of return for a stock with this amount of risk and they expect this growth rate (from part a.) to be perpetually sustainable, what would be the price of one share of Triantis Industries?

c)You believe that this growth rate is only sustainable for three years, after which Triantis Industries dividends will grow at a more modest 5% annual rate forever (the dividend in year 4 will be higher than year 3 by the percentage calculated in part a. whereas the dividend in year 5 will be 5% higher than the dividend in year 4). What price would you be willing to pay now for one share of Triantis Industries stock? Explain completely.