Question: Company E is stable and profitable, generating annual dividends per share of 8 in perpetuity, and currently trading at 100. It is considering changing its

Company E is stable and profitable, generating annual dividends per share of 8 in perpetuity, and currently trading at 100. It is considering changing its business into a growth venture that would generate earnings per share of 10, with an ROE of 25 percent, and increase its stock price to 200. The market capitalization rate of the firm remains constant. What are the implied market capitalization rate, plowback ratio of the growth company, growth rate and present value of the growth opportunity?

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