(Common stock valuation) Assume the following: the investor's required rate of return is 15 percent, the expected level of earnings at the end of this year (E) is $6, the retention ratio is 40 percent, the return on equity (ROE) is 18 percent (that is, it can earn 18 percent on reinvested earnings), and similar shares of stock sell at multiples of 7.692 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (PE) C. What is the stock price using the P/E ratio valuation method? e. Using the dividend discount model, what would be the stock price if the firm could eam 23% on reinvested eamings (ROE)? $ (Round to the nearest cent.) What would be the P/E ratio (PE) If the firm could earn 23% on reinvested earnings (ROE)? oo Enter your answer in each of the answer boxes A 40 57/2020 DOUD 11? pause pause We Tell IS 40 percent, the return on equity (ROE) is 18 percent (that is, it can earn 18 percent on reinvested earnings), and similar shares of stock sell at multiples of 7.692 times earnings per share. Questions: a. Determine the expected growth rate for dividends b. Determine the price earnings ratio (PE) c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? e. What would happen to the P/E ratio (PE) and stock price if the firm could eam 23 percent on reinvested earnings (ROE)? f. What does this tell you about the relationship between the rate the firm can earn on reinvested earnings and P/E ratios? e. Using the dividend discount model, what would be the stock price if the firm could eam 23% on reinvested earnings (ROE)? U SU (Round to the nearest cent) What would be the P/E ratio (PIE,) if the firm could earn 23% on reinvested earnings (ROE)? Enter your answer in each of the answer boxes a ** N pg Up