An investor has bought a stock which has just paid an annual dividend of 10/share. The dividend is expected to grow at a constant rate of 8% indefinitely. The risk free rate is 5%, expected return on the market is 10%, and the stocks beta is 3. a) Calculate the market capitalization rate. Show your workings. (4 marks) b) Calculate the stocks share price. Show your workings. (5 marks) c) The shareholders are now told that the Return on Equity is 15% and the management has decided to set the plowback ratio to 0.8. (i) Calculate the dividend growth rate and the new share price in the light of this information. Show your workings. (8 marks) (ii) If the dividend growth rate has changed, explain why this may lead to a change in the share price? (4 marks) (iii) Calculate the price-earnings ratio based on the latest information. Show your workings. (3 marks) d) The investor wants to know whether the price-earnings ratio may not be a good indicator for performance analysis? Explain 3 reasons why this may or may not be the case?