Company X's current return on equity (ROE) is 17.06%. It pays out one-quarter of earnings as cash dividends, i.e. its payout ratio is 29.1%. Current book value per share is $38.71. The company has 5.68 million shares outstanding. Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces the ROE to 11.02% and the company changes the payout ratio to 71.52%. The company does not plan to issue or retire shares. The cost of capital is 10.77%.

(a) What is the price of stock X?

(b) How much of stock X's value is attributable to growth opportunities (PVGO)? Note that here we cannot use P=(EPS/r)+PVGO because ROE changes over time. PVGO is defined by the difference between the price of stock and the value of share if there is no growth for every period.