Tesmar Corp's current earnings per share is $6 and it has a return of equity is 12%. The management

plans to indefinitely maintain its plowback ratio to 2/3. An annual dividend was just paid. Assume that

next year's market return is 9% and T-bills offer 6%. If the stock has a beta of 1.50, answer the

following questions:

a. Find the price at which Tesmar should sell? (4 Points)

b. Calculate the earnings multiplier for Tesmar? (4 Points)

c. Calculate PVGO. Is the firm deriving more value from assets in place or growth

opportunities? Based on your analysis, make a recommendation to management to

improve shareholder value. (4 Points)