urgent

SpaceTech Ltd. is expected to pay a per-share dividend next year of $30. The markets consensus is that the firms dividend growth rate of 2% per year (which has been going on for many years) will be maintained in the foreseeable future. SpaceTechs cost of equity is 10% per year.

i) What is the price of a share of SpaceTech? (3 marks) SpaceTech has the expected dividend growth of 2% because its return on equity is 8% and management retains 25% of the earnings.

ii) What is the earnings per share of SpaceTech next year? (2 marks)

iii) What is the present value of growth opportunities per share of SpaceTech? (3 marks) Suppose SpaceTech is about to announce that it will increase its retention ratio to 50%, effective immediately.

iv) What will be the new value of the stock after the change in policy? (5 marks)

v) Suppose the market is still unaware of SpaceTechs decision. What kind of option contract should you enter into to profit from this information? And at what exercise price? (3 marks)

vi) If the dividend policy of SpaceTech Ltd. has not shown a clear relationship to its earnings growth, what other absolute valuation model(s) can you use to value the company? What cash flows are used in the valuation? (3 marks)