This question requires data collection. You can find all numbers on finance.yahoo.com.

The questions concern Microsoft (ticker: MSFT).

(a) What are the current price and the current price-earnings ratio?

(b) What is the current plowback ratio?

(c) What is the growth rate of earnings for the next 5 years according to the analysts?

Hint: look for annual growth rates under analyst estimates

(d) What is the beta of MSFT? Hint: look for key statistics. If the risk-free rate (Rf) is

1% and the market risk premium E[RM Rf ] is 11%, what is the required rate of return on MSFT according to the CAPM?

(e) Assume that Microsoft will have earnings and dividends that will grow at the analysts forecasted rate forever after; i.e., the Gordon growth model (GGM) applies. What is the price-earnings ratio that the GGM predicts for Microsoft?