Question: Super Tech most recent EPS was $2. It return on equity is 30%. The company will not pay any dividend for 14 years. After 14

Super Tech most recent EPS was $2. It return on equity is 30%. The company will not pay any dividend for 14 years. After 14 year in the 15th year it will payout 80%, and maintain that payout indefinitely. The stock beta is 2.0, the risk-free rate is 4% and the market risk premium is 8%. a. Calculate the stock price and the PE ratio. b. An analyst suspects the firm ran out of large growth opportunities and will start its 80% payout ratio immediately. Calculate the resulting stock price and the PE ratio.

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