NCH Corporation, which markets cleaning chemicals, insecticides, and other products, paid dividends of \($2\) per share in 1993 on earnings of \($4\) per share. The book value of equity per share was \($40,\) and earnings were expected to grow 6% a year in the long term. The stock had a beta of 0.85, and was selling for \($60\) per share. (The Treasury bond rate was 7%, and the market risk premium was 5.5%.)

a. Based on these inputs, estimate the price–book value ratio for NCH.

b. How much would the return on equity have to increase to justify the price–book value ratio at which NCH was selling for in 1993?