Dividend next year = Earnings * ( 1- retention ratio) = 7*
(1-30%) = 4.9
Intrinsic Value = Dividend Next Year/( Discount rate - Growth) =
4.9/(12%-2%) = 49
Present Value of Growth Opportunities = Stock Value -
Earnings/Discount rate = 49 - 7/12% = 49 - 58.33= -9.33
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