The selling price of a common stock is $45 per share. Its earnings were stated to be $10per share, of which an amount of $4.20/share was paid as dividends.

i)Calculate the current P/E ratio.

ii)Suppose that the companys earnings are anticipated to grow by 10% per year. Calculate the expected price for the next year while keeping in mind that the P/E ratio remains constant.

iii)Now, if an investor had a required rate of return of 15%, and he expected the dividend payout ratio to remain constant and also dividends to raise at a rate of 10 percent. Please suggest would you buy this stock? (Do the working/calculation). Explain your answer.

Provide BA 2 Plus Keys wherever applicable. Do not use excel. Show workings on page