(Common stock valuation) Assume the following: • the investor's required rate of return is 15 percent, • the expected level of earnings at the end of this year (E, ) is $7, • the retention ratio is 40...

part e

Extracted text: (Common stock valuation) Assume the following: • the investor's required rate of return is 15 percent, • the expected level of earnings at the end of this year (E, ) is $7, • the retention ratio is 40 percent, • the return on equity (ROE) is 19 percent (that is, it can earn 19 percent on reinvested earnings), and • similar shares of stock sell at multiples of 8.109 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (PIE,). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? 7.6 % (Round to two decimal places.) b. What is the price earnings ratio (PIE, )? 8.109 (Round to three decimal places.) c. What is the stock price using the P/E ratio valuation method? $ 56.76 (Round to the nearest cent.) d. What is the stock price using the dividend discount model? $ 56.76 (Round to the nearest cent.) e. Using the dividend discount model, what would be the stock price if the firm could earn 24% on reinvested earnings (ROE)? $ (Round to the nearest cent.)