53. Suppose research has shown that "common stocks", as measured by the Standard & Poor's 500, have had an average cash flow payout ratio of 35%. We forecast the average cash flow payout ratio will continue at 35% and that cash flows will grow by an average of 3.50% annually over the long term. With long-term Treasury bond rates yielding 1.70%, we decide a "fair" rate of return on equities is 5.50%. The PE Ratio on the S&P 500 should be approximately:

a. 3.89. d. 17.50.

b. 5.00. e. 23.72.

c. 11.86. f. 40.00.