Question 1: What should the price per share of a firm with the following characteristics be?

a. Earnings per share today of $100, growing at 0% per year the next three years.

Thereafter it grows by 5% per year.

b. Investments of $70, $60, and $50, one year, two years, and three years from now,

respectively. Thereafter investment falls so that the plowback ratio is 10% thereafter.

c. The discount rate is 10%

Question 2: Suppose a firm's ROE is 10%, and is currently generating $100/share in earnings. Its plowback ratio is 20% and its discount rate is 10%.

a. What should the share price for this firm be?

b. What would be the change in price if the plowback ratio increased to 30%?