Where does the 3 come from in this example???

Example: our company forecasts to pay a $5.00. dividend next year, which represents 100% of its earning. This will provide investors with a 12% expected return decide to plowback 40% of the earnings equity of 20%. Instead, we at the firm's current cturn what is the value of the stock the prowback decision? No Growth S 7.12 P = = $41.67 before and after With Curowth 9= 20 x 40 =.08 3 Po= 12.08 = 7 75.00

Example: our company farecasts to pay a $5.00 dividend next year, which represents 100% of its earning. This will provide investors with a 12% expected return Instead, we decide to plowback 40% of the earnings atthe firm's curent eturn on equity of 20% What is the value of the stock befare and after the plowback decision? No Growth P0=.125=$41.67 with arrowth g=.2040=.08p0=12.083=$75.00 Example: our company farecasts to pay a $5.00 dividend next year, which represents 100% of its earning. This will provide investors with a 12% expected return Instead, we decide to plowback 40% of the earnings atthe firm's curent eturn on equity of 20% What is the value of the stock befare and after the plowback decision? No Growth P0=.125=$41.67 with arrowth g=.2040=.08p0=12.083=$75.00