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The market consensus is that SuperSmart Corporation has ROE = 16% and a beta of 1.25, and an expected earnings per share (E 1 )
The market consensus is that SuperSmart Corporation has ROE = 16% and a beta of 1.25, and an expected earnings per share (E1) of $3.16. The market believes that Super Smart Corporation plans to maintain indefinitely its retention ratio (b) of 80%. The expected market return for the coming years is 13%, and risk free assets (10-year Treasury notes) are yielding 5%.
(a) Find the intrinsic value estimate of SuperSmart stock according to the constant growth DDM.
(b) Calculate the present value of growth opportunities.
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