Build It Better Products has come out with a new and improved product
Build It Better Products has come out with a new and improved product. As a result, the firm projects an ROE of 18%, and it will maintain a
plowback ratio of 0.40. It’s earnings this year will be $2 per share. Investors expect a 12% rate of return on the stock. a. At what price and P/E ratio would you expect the firm to sell? b. What is the present value of growth opportunities? c. What would be the P/E ratio and the present value of growth opportunities if the firm planned to reinvest only 20% of its’ earnings?
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