Problem $13-18($Algo$)$

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 $0\mathrm{.}30.$ Its earnings this year will be $$2$ per share. Investors expect a $11\%$ rate of return on the stock.

Required:

a$.$ At what price and P$/$E ratio would you expect the firm to sell? $($Do not round intermediate calculations. Round your answers to $2$

decimal places.$)$

Price

P$/$E ratio

b$.$ What is the present value of growth opportunities? $($Do not round intermediate calculations. Round your answer to $2$ decimal

places.$)$

PVGO

c$.$ What would be the P$/$E ratio and the present value of growth opportunities if the firm planned to reinvest only $25\%$ of its earnings? $($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$