As an analyst for Charlotte and Chelle Capital, you are forecasting the market $\frac{P}{E}$ ratio using the dividend discount model. Because the economy has been expanding for $9$ years, you expect the dividend$-$

payout ratio will be at its low of $50$ percent and that long$-$term government bond rates will rise to $7$ percent. Because investors are becoming less risk averse, the equity risk premium will decline to $3$ percent.

As a result, investors will require a $10$ percent return, and the return on equity will be $12$ percent.

a$.$ What is the expected growth rate? Round your answer to one decimal place.

$\%$

b$.$ What is your expectation of the market $\frac{P}{E}$ ratio? Do not round intermediate calculations. Round your answer to two decimal places.

$\text{'}$

c$.$ What will be the value for the market index if the expectation is for earnings per share of $$87?$ Do not round intermediate calculations. Round your answer to the nearest dollar.

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