In an earnings announcement, XYZ corporation estimates it will pay $5 dividends next year, which represents 100% of its earnings. The required return of its investors is 12%. If the company decides to plowback 60% of the earnings at the firm's current return on equity of 15%. 1. What is XYZ corporation's present value of growth opportunity (PVGO)? 2. Calculate the PVGO for XYZ if the plowback ratio is 20% and 40%, respectively. 3. Given the results in 2), conclude the relationship between plowback ratio and the valuation of stock, and the relationship between plowback ratio and PVGO. 4. Rework you 1) and 2) with a new ROE of 10%, and conclude how ROE affect PVGO