The following information applies to the next two questions (27-28)

27.Ace Ventura, Inc. has expected earnings of $5 per share for next year. The firm's return on equity (ROE) is 15% and its earnings retention ratio is 40% (i.e., the payout ratio will be 60%). If the required rate of return for the firm is 10%,

What should be the stock price now? (Hint: find the growth rate and expected dividend per share for next year first)

1. $70.00
2. $72.50
3. $75.00
4. $77.50
5. $80.00

28.

Based on the information and answer from Q 27, what is Ace Ventura's present value of growth opportunities (PVGO)? (Hint: find the value of the stock when the growth rate is zero first)

1. $25
2. $30
3. $35
4. $40
5. $45