Calculate the Present Value of Growth Opportunities

$($PVGO$).$

Medtronic is expected to earn $$8\mathrm{.}69$ next year. The company has a discount rate of $12\%$ and is able to reinvest its earnings at an ROE of $16\%.$ Currently, the company pays out all earnings in the form of a dividend. How much could they boost their stock price if they lowered their payout ratio to $53\%?$

Hint: see slides $43-45.$

Note: Enter your answer with two decimals and without the $ sign. That is$,$ if your answer is $$50\mathrm{.}514$ then enter $50\mathrm{.}51.$