**could you please show me how to do B. I have the answer but I don't know how to get the formula for present value of current operations which is $20.83.*** thanks

A.Phish Phace Phashions (PhPhPh) has expected earnings of $2.50 per share (E₁= $2.50), retains 60% of its earnings, has an expected return on new investments equal to 17.5%, and has a market capitalization rate of 12% (k= 0.12).

What is your estimate of the value of a current share of PhPhPh?

The growth rate is (60%)(17.5%) = 10.5% andD₁isE₁(1 - 60%) = $2.5(40%) = $1.11.

Po = 1.1/(0.12 - 0.105) = $66.67

B. What is the estimated net present value of future investments for PhPhPh?

The answer is : NPV=$66.67 - $20.83 = $45.84

The present value of the current operations equals $20.83. <---- ***I don't know how they got this***