A particular country's government has adopted a contractionary monetary and fiscal policy in response to an overheated economy. Required: Discuss the likely implications of this policy for: i. The country's stock market overall; and ii. Investors holding cyclical (aggressive) stocks as compared to those holding defensive stocks. (30% b) Dividends of XYZ Inc. are expected to grow by 15% per year for the next three years. This will be followed by a growth rate of 10% per year for next two years. After this five-year period, the growth in dividends is expected to be 5% per year indefinitely. The required rate of return on XYZ, Inc. is 12%. Last year's dividends per share were $3.00. Required: Calculate the value of the XYZ Inc. shares today. Explain your workings. (30% c) Critically evaluate the Price/Earnings (P/E) ratio as a useful measure of the market's assessment of growth opportunities. Your answer should include a discussion of the relationship between the cost of capital and the P/E ratio. A particular country's government has adopted a contractionary monetary and fiscal policy in response to an overheated economy. Required: Discuss the likely implications of this policy for: i. The country's stock market overall; and ii. Investors holding cyclical (aggressive) stocks as compared to those holding defensive stocks. (30% b) Dividends of XYZ Inc. are expected to grow by 15% per year for the next three years. This will be followed by a growth rate of 10% per year for next two years. After this five-year period, the growth in dividends is expected to be 5% per year indefinitely. The required rate of return on XYZ, Inc. is 12%. Last year's dividends per share were $3.00. Required: Calculate the value of the XYZ Inc. shares today. Explain your workings. (30% c) Critically evaluate the Price/Earnings (P/E) ratio as a useful measure of the market's assessment of growth opportunities. Your answer should include a discussion of the relationship between the cost of capital and the P/E ratio