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Business, 25.11.2021 14:00 Sauceyx7

Even Better Products has come out with an even better product. As a result, the firm projects an ROE of 20%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 14% rate of return on the stock. At what price and P/E ratio would you expect the firm to sell?

What is the present value of growth opportunities?

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?

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