Question 1 Purple Plc is a regular dividend payer. Over the last six years they have paid the following dividends: Year 2012 2007 2008 2009 2010 2011 Dividend 17.55p 18.1p 18.6p 21.35p 19.3p 20.1p The 2012 dividend has only just been paid. Earnings per share (EPS) for 2012 were 30.5p. The firm has 10 million shares currently in issue and beta of the firm's shares is 1.5. The current riskless rate in the economy is 4% and market risk premium is estimated to be 6%. a) Calculate the average growth rate for Purple Plc over the last 6 years. [4 marks] b) Calculate the expected return (i.e. cost of capital) for equity holders in Purple Plc. [3 marks] c) What was the plowback ratio of the firm in 2012? [2 marks] d) Assuming dividends continue to grow at the same rate in the future, calculate the current share price of the firm. [5 marks] e) Calculate the expected share price in twelve months time. [3 marks] f) Explain how an investor can use the PER of a company as an investment tool and discuss the problems (shortcomings) associated with using this metric. [8 marks]