Will-O-Wind Airlines always invests (in non-depreciating assets) 20% of its earnings, which will be next period (Period 1) $3 per share. The rest it pays out as dividends. Its investment opportunities currently earn (and are expected to earn in the indefinite future) 18%. There are no taxes. The risk adjusted required rate of return on this stock is 10%. What is its price?

P = DIV1r-b x R = 1-bE1r-b X R

P = 1-0.8) x 30.10-0.2 X 0.18 =$37.5

The answer is $37.50. I need an expert to explain hoe the answer was derived. How was the (1 - 0.8) derived in the formula.