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# (Solved): (Common stock valuation) Assume the following: - the investor's required rate of return is 12 perce ...

(Common stock valuation) Assume the following: - the investor's required rate of return is 12 percent, - the expected level of earnings at the end of this year $$\left(E_{1}\right)$$ is $$\ 10$$, - the retention ratio is 50 percent, - the return on equity (ROE) is 13 percent (that is, it can earn 13 percent on reinvested earnings), and - similar shares of stock sell at multiples of $$9.091$$ times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price eamings ratio $$\left(P / E_{1}\right)$$. c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? a. What is the expected growth rate for dividends? \% (Round to two decimal places.)

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