Question: Company Ps current return on Equity (ROE) is 16%. Current book value per share is $120. Book value per share will grow as the Company

Company Ps current return on Equity (ROE) is 16%. Current book value per share is $120. Book value per share will grow as the Company reinvests earnings. Assume that the ROE stays constant for the next five years; after that competition forces ROE down to 13%. The current payout ratio stays constant at 60%. The cost of capital is 13% a) What is P's stock worth per share? (Show all your calculations) b) How does that value depend on the payout ratio and growth after year 5? Is the company creating shareholder value after year 5? Explain.

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