1. You are a financial analyst and you have the following information for Dominion Tech Company. Dominion Tech Company has beta of 1.5 and a ROE of 15%. The plowback ratio is 40%. Last twelve month earnings were $3 per share. The annual dividend was just paid. The consensus estimate of the coming years market return is 15%, and T-bills currently offer a 5% return.

1a. Find the intrinsic value of Dominion stock

1b. Compute the Leading P0/E1 and Trailing P0/E0 ratios.

1c. Calculate the PVGO?

1d. Suppose your research convinces you that Dominion will announce momentarily that it will immediately increase its plow-back ratio to 60%. Find the intrinsic value of the stock. The market is still unaware of this decision. Explain why the value changes.