NCH Corporation, which markets clearing chemicals, insecticides, and other products, paid dividends of $2 per share in 1993 on earnings of $4 per share. The book value of equity per share was $40, and earrings are expected to grow 6% a year in the long term. The stock has a beta of 0.85, and sells for $60 per share. (The Treasury bond rate is 7%, and the market risk premium is 5.5%.)

1. Based on these inputs, estimate the price/book value ratio for NCH.
2. How much would the return on equity have to increase to justify the price/book value ratio at which NCH sells for currently?