What is the stock price using the dividend discount?model

Question

Assume the? following:

1. the? investor's required rate of return is 12.5 percent,
   the expected level of earnings at the end of this year?(E1?) is ?$10?,
2. the retention ratio is 45 ?percent,
3. the return on equity ?(ROE?) is 13 percent? (that is, it can earn 13 percent on reinvested? earnings), and
4. similar shares of stock sell at multiples of 8.271 times earnings per share.

Problem 1: What is the stock price using the dividend discount?model?

Problem 2: What would happen to the ?P/E ratio ?(P?/E1?) and stock price if the company increased its retention rate to 60 percent? (holding all else? constant)? What would happen to the?P/E ratio (P?/E1?) and stock price if the company paid out all its earnings in the form of? dividends?

Problem 3: What have you learned about the relationship between the retention rate and the ?P/E? ratios?