The cost of equity is 13%. The stock just announced a dividend of 10 in the current year and the current stock price (Po) is 103 (after the dividend is paid).

a. What is the implied stable growth (assume constant forever) for the stock?

b. The ROE is 25% (constant forever). Assume a hypothetical scenario that the company suddenly announces now to increase the retention ratio forever (assume changes to retention ratio will be made in year 0 itself and thus the dividend in the current year will be different from 10) such that the stable growth rate increases to 5%. What would be Po Under such a scenario?