Grott and Perrin Ltd Has Expected Earnings of $3 Per

question 35

Multiple Choice

Grott and Perrin Ltd has expected earnings of $3 per share for next year. The firm's ROE is 20% and its earnings retention ratio is 70%. If the firm's market capitalisation rate is 15%, what is the present value of its growth opportunities?

• A)$20
• B)$70
• C)$90
• D)$115

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Definitions:

Non-Strategic Investment

An investment made without the intention to influence or control the operation or management of the invested entity.

Board of Directors

A group of individuals elected by the shareholders of a corporation to oversee and make decisions on behalf of the company.

Consolidated Worksheet

A financial statement that combines the accounting records of a parent company and its subsidiaries, showing the financial results of the entire group as a single entity.

General Journal

A basic accounting record where all day-to-day financial transactions of a company are initially recorded in chronological order.