1. Flanders, Inc., has expected earnings of $4 per share for next year. The firm's ROE is 8%, and its earnings retention ratio is 40%.

If the firm's required rate of return is 15%, what is the present value of its growth opportunities?

Should this firm be investing in new projects? Explain.

2. The market capitalization rate on the stock of Aberdeen Wholesale Company is 10%. Its expected ROE is 12%, and its expected EPS is $5. If the firm's plowback ratio is 60%, what will the P/E ratio will be?

3. GE is expected to produce earnings next year of $3 per share. It plans to reinvest 25% of its earnings at 20% of ROE. If the GE beta is 0.8, the risk-free rate is 3% the market risk premium is 10%, what should be the value of the stock? If GE is currently trading at 41$, what would you say about its valuation? Under or overvalued? Explain.

4. Transportation stocks currently provide an expected rate of return of 15%. TTT, a large transportation company, will pay a year-end dividend of $3 per share. If the stock is selling at $60 per share, what must be the market's expectation of the constant-growth rate of TTT dividends?