(Common stock valuation) Assume the following: the investor's required rate of return is 12 percent, the expected level of earnings at the end of this year (E1) is $10, the retention ratio is 50 percent, the return on equity (ROE) is 14 percent (that is, it can earn 14 percent on reinvested earnings), and similar shares of stock sell at multiples of 10.000 times earnings per share. e. What would happen to the P/E ratio (P/E1) and stock price if the company increased its retention rate to 80 percent (holding all else constant)? What would happen to the P/E ratio (PIE1) 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? (Common stock valuation) Assume the following: the investor's required rate of return is 12 percent, the expected level of earnings at the end of this year (E1) is $10, the retention ratio is 50 percent, the return on equity (ROE) is 14 percent (that is, it can earn 14 percent on reinvested earnings), and similar shares of stock sell at multiples of 10.000 times earnings per share. e. What would happen to the P/E ratio (P/E1) and stock price if the company increased its retention rate to 80 percent (holding all else constant)? What would happen to the P/E ratio (PIE1) 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