Homework Answers
1)
Price = Annual dividend / required rate
Price = 8 / 0.1
Price = $80
2)
Price = D1 / required rate - growth rate
Price = ( 8 * 1.05) / 0.1 - 0.05
Price = $168
3)
Present value of growth opportunities = $168 - $80
Present value of growth opportunities = $88
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