Question 26 please

Andrea Risso is a junior analyst with AquistareFianco, an independent equity research firm. Risso's supervisor asks her to update, as of January 1, 2015, a quarterly rescarch report for Centralino S.p.A, a telccommunications company headquartered in Italy, On that date, Centralino's common share price is Eso and its preferred shares trade for C5.25 pershare. Risso gathers information on Centralino. Exhibit 1 presents earnings and dividend data, and Exhibit 2 presents balance sheet data. Net sales were C3.182 billion in 2014 . Risso estimates a required return of 15% for Centralino and forecasts growth in dividends of 6% into perpetuity. Note- The data for 20112014 are actual and for 2015 are estimated. Exhibit 1 Earnings and Dividends for Centralino, 2011-2015 Notes: The market value of long-term debt is equal to its book value. Shares outstanding are 41.94 million of commoa shares and 16.00 million of preferred shares. Exhibit.2 Summary Balance Sheet for Centralino, Year Ended December 31, 2014 Exhibit 3 presents forward price-to-earningr ratios (P/E) for Centralino's peer group. Risso assumes no differences in fundamentals among the peer group companies. Exhibits Peer Group Fonward P/Es Risso also wants to calculate normalized EPS using the average return on equity method. She determines that the 20112014 time period in Exhibit irepresents a full business cycle for Centralino. 25. Aased on Rxhibitu, the tralling P/E, for Centralino as of Janaury 1, 2015, ignoring any business-cycle influence, is closest to: A. 8.3 . B. 8.9 . C. 9.9 . 26. Based on Exhibitu and Risso's estimates of return and dividend growth, Centralino's justified forward P/E based on the Gordon growth dividend discount model is closest to: A. 5.4 . B. 5.7 . C. 8.3