National City Corporation, a bank holding company, reported earnings per share of $3 in 1993, and paid dividends per share of $1.6. The earnings had grown 7.5% a year over the prior five years, and were expected to grow 6% a year in the long term (starting in 1994). The stock had a beta of 1.2 and traded for 10 times earnings. The treasury bond rate was 7%. Assume the equity premium rate is 5.5%

A. Estimate the implied P/E Ratio for National City Corporation.

B. What long term growth rate is implied in the firm's current P/E ratio?