The market analysts estimate an ROE of 10% for Gorge inc. Gorge has its retention ratio of 60%. In the last year, its EPS was $5. When T-bill rate is 4%, the expected market return in the coming year is 11%, and its beta is 1.

1) Which price should the stock trade?

2) What is the forward P/E ratio?

3) Caculate PVGO

4) When Gorge decreases its plowback ratio to 10%, how would the stock price be?

5) Comapre the stock price after decreasing its plowback ratio to 10% to the stock price of plowback ratio of 60%. Why does the stock price change?