3. Currently, the dividendpayout ratio(D/E) for the aggregate market is 55 percent, the required return(k) is 9 percent, and the expected growth rate for dividends(g) is 4 percent.

a. Compute the current earnings multiplier.

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b. You expect the D/E payout ratio to decline to 40 percent, but you assume there will beno other changes. What will be the P/E?

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