Summer Co. expects to pay a dividend of $4.00 per share—one year from now—out of earnings of $7.50 per share. If the required rate of return on the stock is 15 percent and its dividends are growing at a constant rate of 10 percent per year, calculate the present value of growth opportunities for the stock (PVGO).
(Hint 1: b =1- Dividend/Earnings)
(Hint 2: you will need to re-arrange g=ROE x b to get ROE!)
Group of answer choices
$50
$80
$30
$26