xyz stock has an expected ROE of 10% per year, expected earnings per share of $5 and expected dividend is $2 per share. Its market capitalization rate is 12% per year.

A) what are the firms price and price earnings ratio?

b) If the firm increases its plowback ratio to 0.8, what would be its price and price- earnings ration?

c) compare the results of A and B to explain the effect of the plowback ratio on the price- earnings ratio.