$3.$You have been reading about the Madison Computer Company $($MCC$),$ which currently retains $83$ percent of its earnings $($$$8$ a share this year$).$ It earns an ROE of almost $34$ percent.

$$ a$)$Assuming a required rate of return of $15$ percent, how much would you pay for MCC on the basis of the earnings multiplier model?$$

$$ b$)$What would you pay for Madison Computer if its retention rate was $59$ percent and its ROE was $17$ percent?