Exercise 13.3 P416-445 a. Calculate the price of a firm with a plowback ratio of 0.60 if its ROE is 20%. Current earnings E, will be $5 per share, and k = 12.5%. b. What if ROE is 10%, which is less than the market capitalization rate? Compare the firm's price in this instance to that of a firm with the same ROE and E, but a plowback rate of b = 0.

Exercise 13.3 P416-445 a. Calculate the price of a firm with a plowback ratio of 0.60 if its ROE is 20%. Current earnings E1, will be $5 per share, and k=12.5%. b. What if ROE is 10%, which is less than the market capitalization rate? Compare the firm's price in this instance to that of a firm with the same ROE and E, but a plowback rate of b=0