You are provided with the following data on the NHC. The company has stable earnings growth of 10% per annum and maintains a constant dividend pay-out ratio. The ratios in the table below are calculated using todays 2021 estimated earnings and balance sheet data.

The Natural Hair Company Based on 2021 Estimates Price/Earnings (P/E) 15.5 Dividend cover 3.0

(i) Analyze and interpret the return on equity for NHC and comment on whether the firm is value adding or value destroying. (ii) If NHC were to increase its dividend pay-out ratio to 0.8, consider the impact on the P/E ratio (assuming the companys return on equity and cost of equity are constant). (iii) Analyze and interpret NHCs price earnings growth (PEG) ratio and if the sector average PEG ratio is 3.5, comment on the PEG ratio for NHC.