Invest_Assignment 2 - FIN3043 Investment Management Assignment 2(Due 1pm 4th Dec 2015 Questions from Chapter 8 Problem 2 17 Questions from Chapter 9

Invest_Assignment 2 - FIN3043 Investment Management...

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FIN3043 Investment Management Assignment 2 (Due: 1pm, 4 th Dec 2015) Questions from Chapter 8: Problem 2, 17 Questions from Chapter 9: Problem 5, 18, 19 Questions from Chapter 12: Problem 5, 17, 19 Questions from Chapter 13 7. Even Better Products has come out with a new and improved product. As a result, the firm projects an ROE of 20%, and it will maintain a plowback ratio of .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 present value of growth opportunities?c. What would be the P/E ratio and the present value of growth opportunities if the firm planned to reinvest only 20% of its earnings?8. The stock of Nogro Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue

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