A firm projects an ROE of 20% and it will maintain a plowback ratio of .30. The next year's earning are expected to be $2.0/per share. Assume investors expect 12% rate of return on the stock. Consider the dividends are expected to grow at a constant rate.
A.) At what price would you expect the firm to sell?
B.) What is the present value of growth opportunities?
C.) What would be the present value of growth opportunities if the firm planned to reinvest only 20% of its earnings?