Stock valuation with two-stage growth tied to plowback policy Current ROE 0.25 Return on equity Plowback ratio 0.5 The ratio of retained earnings over net income Payout ratio 0.5 The ratio of...

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Extracted text: Stock valuation with two-stage growth tied to plowback policy Current ROE 0.25 Return on equity Plowback ratio 0.5 The ratio of retained earnings over net income Payout ratio 0.5 The ratio of dividends paid over net income 0.125 Sustainable growth rate = ROE * plowback ratio EPS, DIV. $4 $2 0.2 Po $ 30.00 General Motors is considering the share price impact of a reduction in plowback ratio to 0.30 starting in year 6 onward. Use a template calculate the price impact of such as policy change. ROE Plowbacknew te5 and onward Payoutnew te6 and onward 0.2 0.3 Plowback,=1 to 5 remains @ 0.5 0.7 Payout, t 5 remains @ 0.5 Calculate the price impact of reducing plowback ratio to 0.3 starting in year 6 onward.