The Parker Dental Supply Company sells at $32 per share, and Ray Parker, the CEO of this well known Research Triangle firm, estimates the latest 12-month earnings are $4 per share with a dividend payout of 50 percent. Dr. Parker's earnings estimates are very accurate.

a. What is Parker's current P/E ratio?

b. If an investor expects earnings to grow by 10 percent a year, what is the projected price for next year if the P/E ratio remains unchanged?

c. Dr. Parker analyzes the data and estimates that the payout ratio will remain the same. Assume the expected growth rate of dividends is 10 percent, and an investor has a required rate of return of 16 percent, would this stock be a good buy? Why or why not?

d. If interest rates are expected to decline, what is the likely effect on Parker's P/E ratio?