The Phoenix $($P$)$ Corp. is operating in an essential business that its local council is sponsoring. To induce P Corp to remain in this essential business, the council has agreed to pay whatever amount is necessary to yield P Corp a $14\%$ book return on equity. P Corp is expected to pay a $ $4$ dividend next year $($i$.$e$.,$ in year $1).$ It has been reinvesting $45\%$ of earnings. $($Round answers to two decimal places$).$If it continues the growth trend. g is equal to $6\mathrm{.}3\%$ and the long run rate of return is $10\mathrm{.}3$ if it was bought at $100$ dollars $.$ What is the EPS in year $1.$ and what part of the $$100$ price is attributable to the present value of growth opportunities $($PVGO$)($in $$)?$

Answer rating: 100% (QA)

To calculate the EPS Earnings Per Share in year 1 we can use the Gordon growth model f... View the full answer