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What is the implied growth rate-xyz inc

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Reference no: EM132687039

XYZ Inc. has expected earnings over the next year of $2/share (E1 = 2). The company is expected to maintain an earnings retention rate of 40%, i.e., 60% of earnings are expected to be paid out as dividends every year. The company has a beta of 1.5, the risk-free rate is 4%, and the market risk premium is also 4%.

If the current price of the stock is $16/share

i. What is the implied growth rate?

ii. What is the implied ROE?

iii. What is the present value of growth opportunities?

Reference no: EM132687039

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