Constantly growing dividend discount model

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Reference no: EM131185328

Grott and Perrin, Inc., has expected earnings of $3 per share for next year. The firm's ROE is 20%, and its earnings retention ratio is 70%. If the firm's market capitalization rate (cost of equity) is 15%, what is the present value of its growth opportunities (PVGO)? Assume that the stock price is effectively measured by the constantly growing dividend discount model. (Dividend in next year = EPS*(1-retention rate).)

Reference no: EM131185328

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Constantly growing dividend discount model : Grott and Perrin, Inc., has expected earnings of $3 per share for next year. The firm's ROE is 20%, and its earnings retention ratio is 70%. If the firm's market capitalization rate (cost of equity) is 15%, what is the present value of its growth opp..

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