Castles in the Sand generates a rate of return of 20% on its investments and maintains a plowback ratio of 0.30. Its earnings this year will be $4 per share. Investors expect a 12% rate of return on the stock.

(a) Find the price and P/E ratio of the firm.

(b) Find the price and P/E ratio of the firm if the plowback ratio is reduced to 0.20.