Stock A has earnings of $5 per share at year 1. The interest rate is 20%, and the return on equity is 25%. If there is no plow-back, what is the earnings per share at year 3 (EPS3) ?

a. $5.00

b. $3.00

c. $4.00

d. $2.00

e. none of the above

Stock A has an earnings of $5 per share at year 1. The interest rate is 20%, and the return on equity is 25%. If there is a plow-back of 40%, what is the stock price at year zero (P0) ?

Select one:

a. $15.00

b. $25.00

c. $30.00

d. $33.00

e. none of the above