1. (15 points) Alpha Inc, Beta Inc and Gamma Inc are three companies whose stocks have similar risk, hence they have the same equity cost of capital (20%). Both firms are expected to generate the same earnings per share at the end of this year, in the amount of $24 per share. However, the three firms differ in terms of their reinvestment policy:
   • Alpha Inc reinvests 50% of its earnings at an ROE of 16% every year in perpetuity.
   • Beta Inc reinvests 40% of its earnings at an ROE of 20% every year in perpetuity.
   • Gamma Inc reinvests 32% of its earnings at an ROE of 25% every year in perpetuity.

1. (3 points) What is the expected dividend growth rate for each firm?
2. (6 points) What is the stock price for each firm today (t = 0), assuming that each stock is correctly priced?
3. (3 points) What is the present value of growth options (PVGO) for each firm?
4. (3 points) Suppose that each firm announces that it will increase its dividend payout rate to 100% (so under the new policy each firm will pay out 100% of its earnings every year forever). What will be the new stock price for each firm today (t = 0), immediately after this announcement?

Please do not answer with an excel sheet. I need to see it written down with the formulas. Thank you!