4. XYZ, a leading manufacturer of software products, had a return on equity in 2019 of 31.4%, and paid out 36% of its earnings as dividends. It earned a net income of $1,625 million on a book value of equity of $5,171 million. As a consequence of competition, it is expected that the return on equity will drop to 25% in 2020 and that the dividend payout ratio will remain unchanged.

A. Estimate the growth rate in earnings based upon 2019 numbers.

B. Estimate the growth rate in 2020, when the ROE drops from 31.4% to 25%.

C. Estimate the growth rate after 2020, assuming that 2020 numbers can be sustained.