ABC company forecasts a $5. 00 dividend (per share) can be paid next year if it pays 100% of its earnings as dividends. Instead of paying out all the earnings as dividends, ABC decides to plowback part of the earnings at the firm's retum on equity of 20%. Suppose the discount rate is 8%, please answer the following two questions (Q8-Q9) based on the given information:
If the present value of growth opportunities (PVGO) is going to be $37. 5, then the plowback ratio is
A. 10%
B. 15%
C. 20%
D. 25%