PROBLEMS (75 MARKS) (Show all the calculation steps) PROBLEM 1 (25 MARKS) Digital Fragrances Technology, a leading creator and manufacturer of flavors and fragrances used in virtual environments, paid out dividends of $0.91 per share on earnings per share of $1.64 in 1992. The firm is expected to have a return on equity of 20% between 1993 and 1997, after which the firm is expected to have stable growth of 6% a year (the return on equity is expected to drop to 15% in the stable growth phase.) The dividend payout ratio is expected to remain at the current level from 1993 to 1997. The stock has a beta of 1.10, which is not expected to change. The treasury bond rate is 7%. a) Compute the Payout Ratio of the company (10 marks) b) Compute the Cost of Equity of the company (10 marks) c) Estimate the P/E ratio for the company