Present value of growth opportunities

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Google is expected to have earnings over the next year of $10/share (E1 = 10). They are expected to maintain an ROE of 20% forever, i.e., in perpetuity. The payout ratio is expected to be 0% for the next 10 years (time 1 to time 10); however, thereafter they will maintain a payout ratio of 75%. (Note: The first dividend will be paid at time 11.) If the required return on the equity is 10%, what is Google's present value of growth opportunities (PVGO) per share (at time 0)?

Reference no: EM131986925

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