ven Better Products has come out with an even better product. As a result, the...
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ven Better Products has come out with an even better product. As a result, the firm projects an ROE of 20%, and it will maintain a plowback ratio of 0.40. Its earnings this year will be $2 per share. Investors expect a 13% rate of return on the stock. Required:
a. At what price and P/E ratio would you expect the firm to sell?
b.What would be the P/E ratio and the present value of growth opportunities if the firm planned to reinvest only 30% of its earnings?
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