B - You are a little skeptical of the valuation you have calculated based on the competitors' PE ratios, so you decide to calculate a PE ratio based on Pendant's ROE and retention ratio. First, you need to figure out what an appropriate rate of return should be for the holding Pendant's stock. You have collected monthly data for the excess return of the market and Pendant's stock over the last 5 years (given below). Assuming the risk free rate is 2.5% and you expect the return on the market to be 5.0% over your investment horizon, what is Pendant's beta and expected return? (10.5 points total) 2.50%5.00% C. Pendant has a retention ratio of 75%, and an ROE of 3.5\%. Using the required return calculated in part B, what would an appropriate PE ratio and price be for Pendant's stock? (10.5 points total) B - You are a little skeptical of the valuation you have calculated based on the competitors' PE ratios, so you decide to calculate a PE ratio based on Pendant's ROE and retention ratio. First, you need to figure out what an appropriate rate of return should be for the holding Pendant's stock. You have collected monthly data for the excess return of the market and Pendant's stock over the last 5 years (given below). Assuming the risk free rate is 2.5% and you expect the return on the market to be 5.0% over your investment horizon, what is Pendant's beta and expected return? (10.5 points total) 2.50%5.00% C. Pendant has a retention ratio of 75%, and an ROE of 3.5\%. Using the required return calculated in part B, what would an appropriate PE ratio and price be for Pendant's stock? (10.5 points total)