Question: Assume that P/E ratios are computed using current price and expected earnings (rather than current earnings), and that all earnings and dividend values are annual

Assume that P/E ratios are computed using current price and expected earnings (rather than current earnings), and that all earnings and dividend values are annual values. (SHOW ALL CALCULATIONS, NO EXCEL FUNCTIONS)Assume that P/E ratios are computed using current price and expected earnings

8. ERP, Inc. is expected to have earnings per share next year of $8.00. The firm's capitalization rate is 11.5%, its plowback ratio is 30% and its dividend growth rate is 5.25%.4 pts a. What is ERP's PVGO? b. Would you recommend ERP keep its plowback ratio at 30%, increase it, or decrease it? Explain why. (A mathematical demonstration will not earn all of the credit.)

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