The current risk free rate is 3 percent and the market risk premium is 5 percent. You are trying to value ABC company and it has an equity beta of .9. The company earned $2.50 in the year that just ended. You expect the company's earnings to grow 4 percent per year. The company has an ROE of 12 percent.
a. What is the value of the stock?
b. What is the present value of the growth opportunity?