1. A company has expected earnings of $3 per share for next year. The firm's ROE is 20%, and its earnings retention ratio is 70%. If the firm's market capitalization rate is 15%.
1) What is the present value of its growth opportunities?
2) What is the stock’s P/E ratio?
2. A promissory note calling for payments of $1100 at the end of each year for the next fifteen years is offered for sale at $10,000. Find the rate of return.