22. Growth opportunities (S4.5) Look again at the financial forecasts for Growth-Tech given in Table 4.5 . This time assum you know that the opportunity cost of capital is r=0.12 (discard the 0.099 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 P3, the price forecasted for year 3 ? c. What part of P3 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.) TABLE 4.5 Forecast earnings and dividends for Growth-Tech. Note the changes in year 3: ROE and earnings drop, but payout ratio increases, causing a big jump in dividends. However, subsequent growth in earnings and dividends falls to 8% per year. Note that the increase in equity equals the earnings not paid out as dividends