Company ABCs earnings per share this year are $5. ABCs earnings are expected to grow at rate g every year. The return that investors expect on ABC is 10%. ABCs current (ex-dividend) stock price is $80. ABCs payout ratio is 0.4. (a) Determine g. (b) Determine the present value of ABCs growth opportunities.

(a) g solves 50.4(1+g) / 0.10g = 80; g = 0.073171.

I want to know what is the (1+g) in the equation