You are working as a financial analyst in the equities department of an investment fund. One of the firms in which the fund holds a 20% stake, GrowTech plc, is considering undertaking a rights issue. The financial manager of GrowTech plc, Paul OConnor, has approached the fund manager, Sarah Purcell, to gauge her interest in taking part in the issue. GrowTechs share price is currently 69.32, and Paul has indicated that the rights issue would likely take place at a 10% discount to current market value. As an expert in equity valuation, Sarah has tasked you with determining whether or not the rights issue represents a good investment opportunity for the fund. As such, you have gathered and forecast the following information in relation to Growtech plc: Sales in 2019 were 270m, and are expected to grow at a rate of 18% p.a. in 2020 and 2021, and at a rate of 15% per annum in 2022 and 2023. Historically, Growtech plc has enjoyed a healthy operating profit margin averaging 30% over the last 5 years. This rate is expected to persist over the next three years, but drop to 25% thereafter as the market for the firms goods becomes more competitive. The firm has 1.4 million 20-year coupon bonds in issue with a face value of 100 and a coupon rate of 8%. There are no plans to issue additional debt in the near future or redeem the bonds early. The firms marginal tax rate is 10% and this is expected remain constant indefinitely. As a growing firm, GrowTech have maintained a relatively low dividend pay-out ratio over the last number of years. In 2019 only 12% of net income was paid out as dividends, but the ratio is expected to double in 2020 and double again in 2021, at which point it will be kept constant indefinitely. The firms cost of equity is 15% and the book value of its equity was 220m at the end of 2019. There are currently 10m shares in issue. Residual earnings are expected to grow at 4% per annum indefinitely beyond 2023.

Required: Use the Residual Earnings valuation model to assess the financial viability of the investment fund partaking in GrowTech plcs rights issue. Work to the nearest 0.1m at all times.