Reizenstein Technologies (RT) has just developed a solar panel capable of generating 200% more electricity than any other solar panel currently in the market.

As a result, RT is expected to experience a 15% annual growth rate for the next 5 years. By the end of the 5 year period, other firms will have developed comparable technology, and RTs growth rate will slow to 5% per year indefinitely. Stockholders require a return of 12% on RTs share. The most recent annual dividend (D0), which was paid yesterday, was 1.75 per share.

a) Calculate RTs expected dividends for years 1 to 5.

b) Calculate the present value (price) of the share.

c) What happens if a company has a growth rate (g) that exceeds its require rate (r)? Explain.

d) Discuss the factors determining the growth rate of dividends.