Intergalactic Software Company’s shares have a market price of $20 and a book value of $12.

Intergalactic Software Company’s shares have a market price of $20 and a book value of $12. if its cost of equity capital is 15 per cent and its book value is expected to grow at 5 per cent per year indefinitely, what is the market’s assessment of its steady state return on equity? If the share price increases to $35 and the market does not expect the organization’s growth rate to change, what is the revised steady state ROE? If, instead, the price increase was due to an increase in the market’s assessments about long-term book value growth rather than long-term ROE, what would the price revision imply for the steady state growth rate?

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