Share price is comes from value of growth opportunities

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Reference no: EM131914050

Fogell Enterprises is a distributor of superbad tasting Goldslick Vodka. They are expected to earn $4.13 per share in the coming year and they have a policy of retaining 12% of profits to fund future growth. Fogell earns a permanent 19% return on any retained earnings plowed back into the business in the following year (i.e. ROE = NIt/Et-1). Investors currently demand a 15% return on similar risk investments. What percentage of the current share price is comes from the value of their growth opportunities (i.e. what is PVGO/Price)?

Reference no: EM131914050

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