What is the present value of growth opportunities

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Reference no: EM132534953

Lets say Netscape is operating in a new industry that has recently caught on with the public. Sales are growing 80% per year. This high sales growth rate is expected to translate into a 25% growth rate in cash dividends for each of the next 4 years. After that, the dividend growth rate is expected to be 5% per year forever. The latest annual dividend, paid yesterday, is $0.75. The stock's required return is 22%. What is a share of Netscape stock worth?

If Fledgling Electronics will pay a dividend of $10 next year; is expected to grow by 5% a year; plows back a constant 20% of earnings and has a market capitalization rate of 14%:

Question a) What is the next year's expected earnings per share (EPS 1 )?

Question b) What is the return on equity (ROE)?

Question c) What is the present value of growth opportunities (PVGO)?

Reference no: EM132534953

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