What is the present value of growth opportunities for ART?
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 this year will be $3 per share. Investors expect a 12% rate of return on the stock.
A. $8.57
B. $9.29
C. $14.29
D. $16.29
B. $9.29
PVGO = P 0 - (EPS 1 /k) = 34.29 - (3/.12) = $9.29
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