23. Look again at the financial forecasts for Growth-Tech given in Table 4.5 . This time assume you know that the opportunity cost of capital is r ⫽ .12 (discard the .099 figure calculated in the text). Assume you do not know Growth-Tech’s stock value. Otherwise follow the assumptions given in the text.

a. Calculate the value of Growth-Tech stock.

b. What part of that value reflects the discounted value of P 3 , the price forecasted for year 3?

c. What part of P 3 reflects the present value of growth opportunities (PVGO) after year 3?

d. Suppose that competition will catch up with Growth-Tech by year 4, so that it can earn only its cost of capital on any investments made in year 4 or subsequently. What is Growth-Tech stock worth now under this assumption? (Make additional assumptions if necessary.)