What is the present value of growth opportunities for ART

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1. You are valuing an investment that will pay you $10,000 the first year, $12,000 the second year, $14,000 the third year, $16,000 the fourth year, $20,000 the fifth year, and $25,000 the sixth year (all payments are at the end of each year). What is the value of the investment to you today if the appropriate annual discount rate is 15%?

2. ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of .20. Its earnings NEXT YEAR will be $3 per share. Investors expect a 12% rate of return on the stock. a) determine firms growth b) at what price would you expect art to sell? c) what's the present value of growth opportunities for ART? d) At what p/e ratio would you expect ART to sell?

Reference no: EM132065180

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