Analysts use various models for valuing companies. (a) One method is to take recent earnings and assume they grow by a fixed rate. How would you use this information to value the firm? For this method give a formula and explain how it is derived. (b) A second method is to calculate the firms P/E ratio to predict which stock to buy. Under what conditions does this method make sense? i.e. derive the P/E ratio as a measure that is derived from a firm valuation formula. (c) What are the limitations of these methods or variations on these methods? (Hints: (a) think of the assumptions being made on earnings growth; (b) the limitations in using current and past accounting information; (c) the assumptions on the relative risk of the earnings stream.) (d) Would you expect analysts to be able to make abnormal returns using these models? Explain your answer and any evidence to support your answer. (Hint: look at Malkiel