Question 3 (15 points) An equity analyst is preparing a valuation report on a company, Tulipa, that has a beta with respect to the market portfolio return of 1.6, and a return on equity of 11.50%. Tulipa pays out 40% of its earnings to the shareholders each year as dividends. Assume that the annual excess return on the market is 6.5% and the risk free rate of return is 5%. Earnings grow at a constant rate. a) Assuming the CAPM holds, what is the market capitalization rate? (5 points) b) If the forecasted earnings per share for next year happens to be $10, what is the current market value of Tulipa? (5 points) c) What is the PVGO (present value of growth opportunities) of Tulipa? Can you increase Tulipa's stock price and how? I expect to see numerical analysis. (5 points)