1. A firm’s capitalization rate is 22%, while the firm invests in projects with ROE of 20%. The growth in the firm is described by this relationship:The firm’s year-end dividend will be $2 per share, while EPS is $5. What is the stock price?
a. 8
b. 20
c. 22
d. 25
2. What is the PV of opportunities?
a. 0
b. 2.50
c. 1.49
d. -2.73