Derek's company has existing assets that generate Earnings Per Share EPS of $5. If Derek does not invest except to maintain existing assets, EPS is expected to remain constant at $5 a year. However, starting next year, Derek an opportunity to invest $3 per share a year in developing a new technology. Each investment is expected to generate a 20% return (assume that this return is not compounded, so each year the return is 3.2 ). The technology will be fully developed by the end of the fith year. (a) What will be the stock price and PE ratio assuming that investors require a 12\%? [Hint: use the dividend discount model] (b) Following your results in the previous question), the effect of a higher PE ratio after investing in the technology can only be explained by the low risk of 12% required by the investors. True/False. Explain using the concept of PVGO