Calculate the present value of growth opportunities

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Parcel Corporation Company plans $10 dividend next year (100% of earnings). Instead, company plows back 30% of earnings (i. e plowback ratio Is 30% and payout ratio is 1-30% = 70% and dividend payment is $7 = 70%* 10) at firm's current return on equity of 25% (forever). The required rate of return on the stock is 13%, calculate the present value of growth opportunities. See slides page 41-42 as an example.

Reference no: EM131300084

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