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?
Answers: 1
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Even Better Products has come out with an even better product. As a result, the firm projects an ROE...
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