1.

What does a P/B ratio bigger than 1 indicate?

2.

Explain the investment opportunity set, efficient and inefficient portfolios

3.

The common stock of ABC has a required return of 16 percent. The company just paid dividends of $0.90 per share. Future dividends will increase by 15 percent for the following 3 years. After that, the dividend growth rate will be 3 percent indefinitely. What is one share of this stock worth today? Solve it using the three step approach. Show all the steps clearly.