Even Better Products has come out with an even better product. As a result, the

firm projects an ROE of 20%, and it will maintain a plowback ratio of 0.30. Its

earnings

this year will be $2 per share. Investors expect a 12% rate of return on the

stock. (please use formula

a. At what price and P/E ratio would you expect the firm to sell?

b. What is the present value of growth opportunities?

c. What would be the P/E ratio and the present value of growth opportunities if the firm

planned to reinvest only 20% of its earnings?