$($Common stock valuation$)$ Assume the following:

the investor's required rate of return is $14$ percent,

the expected level of earnings at the end of this year $(E_1)$ is $$12,$

the retention ratio is $50$ percent,

the return on equity $(ROE)$ is $12$ percent $($that is$,$ it can earn $12$

percent on reinvested earnings$),$ and

similar shares of stock sell at multiples of $6\mathrm{.}250$ times earnings per

share.

Questions:

a$.$ Determine the expected growth rate for dividends.

b$.$ Determine the price earnings ratio $(\frac{P}{E_1}).$

a$.$ What is the expected growth rate for dividends?

$\%($Round to two decimal places.$)$