The market consensus is that MMFI Corporation has an ROE $59\%,$ has a beta of $1\mathrm{.}25,$

and plans to maintain indenitely its traditional plowback ratio of $2/3.$ This year's earn$-$

ings were R$3$ per share. The annual dividend was just paid. The consensus estimate of

the coming year's market return is $14\%,$ and T$-$bills currently oer a $6\%$ return.

$($a$)$ Find the price at which MMFI stock should sell.

$($b$)$ Calculate the P$/$E ratio.

$($c$)$ Calculate the present value of growth opportunities.

$($d$)$ Suppose your research convinces you MMFI will announce momentarily that it will

immediately reduce its plowback ratio to $1/3.$ Find the intrinsic value of the stock.

The market is still unaware of this decision. Explain why V$0$ no longer equals P$0$ and

why V$0$ is greater or less than P$0.$