(Common stock valuation) Assume the following: - the investor's required rate of retum is 14 percent, - the expected level of eamings at the end of this year (E1) is $12, - the retention ratio is 30 percent, - the return on equity (ROE) is 13 percent (that is, it can eam 13 percent on reinvested eamings), and - similar shares of stock sell at multiples of 6.931 times earnings per share. Questions: a. Determine the expected growh rate for dividends. b. Determine the price earnings ratio (PYE E1 ) c. What is the stock price using the P/E ratio valuation mothod? d. What is the stock price using the dividend discount model? e. What would happen to the P/E ratio (PJE1) and stock price if the company increased its retention rate to 75 percent (holding all eise constant)? What would happen to the P/E ratio (PIE E1 ) and stock price if the company paid out all its earnings in the form of dividends? f. What have you learned about the relationship between the retention rate and the P/E ratios