Answered: $8 per share. The pay-out ratio is 60%…

$8 per share. The pay-out ratio is 60% and it will remain same. If the ROE of the firm is 25% and required rate of return on equity is 13%, find the present value of growth opportunities.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 10P

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Question

A firm is expected to earn $8 per share. The pay-out ratio is 60% and it will remain same.
If the ROE of the firm is 25% and required rate of return on equity is 13%, find the present
value of growth opportunities.
a. $160.00
b. $61.54
c. $98.46
d. None of the ohOU

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