Assume that the dividend payout ratio will be 55 percent when the rate on long-term government bonds falls to 9 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 8 percent and investors will require a 7 percent return. The return on equity will be 13 percent.

1) What is the expected sustainable growth rate?

2) What is your expectation of the market P/E ratio?

3) To what price will the market rise if the earnings expectation is $1.5?

Please show all work and explain. Thanks!!