Question $8$

The Micro Management Corporation $($MMC$)$ currently operates as a cash cow, i$.$e$.,$ it pays out all

its earnings as dividends. Based on your expectation that MMC has good investment

opportunities, allowing the firm to earn a $12\%$ return on retained earnings $($ROIC$)$ every year, you

suggest the firm should reduce its dividend pay$-$out ratio to a new level of $60\%$ starting at $t=1.$

Current earnings $(t=0)$ are $$240,000$ and the corporation has $40,000$ shares outstanding.

If the required rate of return on the stock is $10\%,$ what is the net present value of the growth

opportunities per share $($NPVGO$)$ for MMC$?$