(Common stock valuation) Assume the following: - the investor's required rate of reburn is 15 percent. - the expected level of eamings at the end of this year (E1) is $5. - the retention ratio is 50 percent. - the retum on equity (ROE) is 20 percent (that is, it can eam 20 percent on reirvested eamings), and - simlits shares of stock sell at mulfiples of 10.000 times eamings per share. Queshons: a. Determine the expected orowth rate for dividends. b. Delermine the price eamings rato (PE1). c. What is the stock price using the P/E ratio valuation method? - the expected lave of eamings at the end of this year (E1) is 56 , - the retention ratio is 50 pervent. - the retum on equity (ROE) is 20 percont (that is, ti can eam 20 percent on reinvosted earnings), and - similar shares of stock sell at multiples of 10.000 timen eamings per share. Questions: a. Dosemine the expected growthrate for dividends b. Determine the pice eamings ratio (PE,). c. What is the shock price using the PIE ratio valuation method? d. What is the stock phoe viting the dividend disoount model? e. What would happen to the P.E ratio (P.E, ) and stock price it the femt could earm 25 percent on reinvested earnings (ROe)? 1. What does this tell you about the relationship bebween the rate the firm can eam on reirvested earrings and P.E ratios? c. What is the shock prioe using the PFE ratio valuation method? (Round to the roarest cent.) d. What is the tlock price using the dividend discount model? (Round to the netrest cent) e. Using the dividend dibcount model, what would be the stock price it the firm could eam 25% on reimested eaming (ROE)? (Round to the nearest cent.) What would be the PrE ratio (PE, ) if the firm could earn 25% on reinvested earnings (ROE)? (Round to three decimal places.) 1. What does thin lell you about the relationship between the rate the fren can eam on reirvested earnings and PEE ratios? (Select from the drop-down meris) The higher the ROE, other things being the same, the the value of the corrnon stock and thus the