Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 10%. Its expected earnings this year are $4 per share. Find the stock price, P/E ratio, and growth rate of dividends for plowback ratios of (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter the growth rate as a whole percent.) :

Assume that the Plow back Ratio is 50

Now,

To Compute the growth rate;

Growth rate = Return on equity * Plow back ratio

Growth rate = 10% * 0.50

Growth rate = 5.0%

Computation of the stock price.

Stock price = Dividend pa share / (Required rate - Growth rate)

Stock price = Earnings pa share * (1 - Plow back ratio) / (Required rate - Growth rate)

Stock price = $4 * (1 - 0.50) / (10% - 5.00%)

Stock price = $2.00 / 5.00%

Stock price = $40

Computation of the P/E ratio.

PIE ratio = Stock price / Earnings pa share

PIE ratio = $40 / $4

PIE ratio = $10