Present value of growth opportunities, Accounting Basics

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Present value of growth opportunities

Problem:

Reynolds Inc. has expected earnings of $4 per share for next year. The firm's ROE is 15.5%, and its earnings retention ratio is 54%.

Required:

Question: If the firm's market capitalization rate is 11.2%, what is the present value of its growth opportunities?

Note: Explain all steps comprehensively.

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Accounting Basics: Present value of growth opportunities

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Accounting Basics: Present value of growth opportunities

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