What is present value of growth opportunities

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Reference no: EM131981446

Even Better Products has come out with a new and improved product. As a result, the firm projects an ROE of 20%, and it will maintain a plowback ratio of 0.40. Its projected earnings are $2 per share. Investors expect a 12% rate of return on the stock.

a. At what price and P/E ratio would you expect the firm to sell? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Price $

P/E ratio

b. What is the present value of growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

PVGO $

c. What would be the P/E ratio and the present value of growth opportunities if the firm planned to reinvest only 10% of its earnings? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

P/E ratio

PVGO $

Reference no: EM131981446

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