In late 2007, General Electric (GE) was trading at $24.75. Analysts forecast EPS of $2.21 in 2008 and $2.30 in 2009. Dividends forecasted were $1.24 in 2008. Use a 9.1% cost of capital for the questions below.

a) Calculate GEs normal forward P/E and the actual forward P/E.

b) The estimated abnormal earnings growth for 2009 indicates the GEs stock should trade at about a normal P/E. Show this.