What is present value of growth opportunities

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Reference no: EM132015955

Web Cites Research projects a rate of return of 10% on new projects. Management plans to plow back 20% of all earnings into the firm. Earnings this year will be $3 per share, and investors expect a rate of return of 5% on stocks facing the same risks as Web Cites.

a. What is the sustainable growth rate? (Enter your answer as a whole percent.)

b. What is the stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is the present value of growth opportunities (PVGO)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. What is the P/E ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

e. What would the price and P/E ratio be if the firm paid out all earnings as dividends? (Round your answers to 2 decimal places.)

Reference no: EM132015955

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