My question is$,$ why when calculating the NPVGO, are they only dividing the return by R and not both the $($investment $+$ return$)/$R$?$ What does return$/$R represent? b$)$

First, calculate growth rate of opportunity

$G=$ retention ratio $X$ return $on$ earnings

$G=0\mathrm{.}40\mathrm{.}2$

$G=0\mathrm{.}08or8\%$

Now, we need to find NPV of the investment

Year $3$: $40\%$ earnings are reinvested $=40\%$ of $$7=$$$2\mathrm{.}8$

Return on investment one year later $=$$$2\mathrm{.}820\%=$$$0\mathrm{.}56$

This occurs till perpetuity @ $8\%$

Investment $+$ return $\frac{?}{R}$

NPVGO$=\frac{\frac{-2\mathrm{.}8+\frac{0\mathrm{.}56}{0\mathrm{.}1}}{0\mathrm{.}1-0\mathrm{.}08}}{1+0\mathrm{.}1}2$

NPVGO$=\frac{\frac{-2\mathrm{.}8+\frac{0\mathrm{.}56}{0\mathrm{.}1}}{0\mathrm{.}1-0\mathrm{.}08}}{1+0\mathrm{.}1}2$

NPVGO$=115\mathrm{.}70$

Now, value of stock:

$P=PV($ EPS $)+$ NPVGO

$P=70+115\mathrm{.}70$

$P=185\mathrm{.}70$