P-E ratio and present value of growth opportunities

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Even Better Products has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.40. Its projected earnings are $2 per share. Investors expect a 15% rate of return on the stock. a. At what price and P/E ratio would you expect the firm to sell? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price $ P/E ratio b. What is the present value of growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.) PVGO $ c. What would be the P/E ratio and the present value of growth opportunities if the firm planned to reinvest only 20% of its earnings? (Do not round intermediate calculations. Round your answers to 2 decimal places.) P/E ratio PVGO $

Reference no: EM131989745

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