Your PE firm is considering acquiring a publicly traded digital advertising company, Star Dust Enterprises (SDE). The following are some key statistics of the stock of SDE today (t = 0). SDE is 100% equity financed. Its cost of capital (apply this to all cash flows) is 11.6% and the payout ratio is 71%. Expected earnings per share of SDE at next year (t = 1) are $6.3. Assume that without new investments, expected earnings of SDE would remain at their time-1 level in perpetuity. All future investments are expected to generate $0.2 in incremental earnings for each $1 of investment. For an investment made at time t, incremental cash flows are generated starting in year t + 1.

(a) Compute expected dividend per share of SDE next year (t = 1):

(b) Compute expected dividend per share of SDE two years from now (t = 2):

(c) What is the present value of growth opportunities (PVGO) of SDE today?