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Question: Even Better Products has come out with a new and improved product. As a result, the firm projects and ROE of 20%, and it will maintain a plowback ratio of 0.30. Its earnings this year will be $2 per share. Investors expect a 12% rate of return on the stock.

a. At what price and P/E ratio would you expect the firm to sell?

b. What is the PVGO?

c. What would be the P/E ratio and the PVGO if the firm planned to reinvest only 20% of its earnings?

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Category:- Basic Finance
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