Today’s stock price reflects investor expectations about the earning power of the firm’s current and future assets. Take Google, for example. All its earnings are plowed back into new investments and the stock sells at price of $344. Suppose that the earnings from Google’s existing business are expected to stay constant in real terms. Investors are valuing Google’s future investment opportunities at $164. Find Google’s current earnings per share. (Investors also expect an estimated 7.4% real cost of equity)
(a) $180 (b) $34 (c) $13 (d) $2