Consider a company that pays out all its earnings (i.e., the payout ratio = 1 or plowback/retention ratio=0). The required return for the firm is 13%.

Compute the intrinsic P/E if its ROE is 15%.

Compute the intrinsic P/E if its ROE is 20%.

Discuss why your answers to parts (a) and (b) differ or do not differ from one another.

Suppose that the companys ROE is 13%. Compute its intrinsic P/E value.

Would the answer to part (d) change if the company retained half of its earnings instead of paying all of them out? Discuss why or why not.