East Coast Electronics Inc. (ECE) just paid an annual dividend of $5. Its stock currently trades at $60 and has a B of 1.20. Further, you know that ECE has a P/E ratio of 10 and does not plan to change its cash-flow reinvestment policy in the future. The return on equity for ECE investments is 12%, the risk free rate is 2%, and the expected market return is 12%. 1. Using the Gordon growth model, what is the value of ECE stock? (10p) 2. What is your expert recommendation for trading ECE stock (buy/sell/do nothing)? Motivate your answer. (5p) 3. Is the ECE cash-flow reinvestment policy optimal for shareholders? Why or why not? (5p)