Hey Chegg, I need your help with this problem. I tried to solve it on my own, but I am not quite sure if I am right. That is why I need your help. Please take a look at my solutions and tell me if I am right. If I happen to be wrong, tell me what my mistakes were. It would really help me a lot.

There is a firm, which reinvests its profits back in itself. Consequently, it does not distribute any of its profit to the owners for the first 5 years. Afterward, it begins paying 46 per share for the sixth year. That rises by 200% for the 7^th year and by 100% for the 8^th. Beyond the 8^th year, it grows perpetually at a constant rate. Its dividend payout ratio is .6, its D/E is 50/50, its tax rate is .2, and its unlevered beta is 1. The net profit margin is .05. The asset turnover ratio is 2. The market premium is .04 and the risk free rate is .02. If the information for the last three sentences is applying to year 9, compute the price of the company.

Levered Beta = Unlevered beta *{1+D/E*(1-t)} = 1*(1+1*0.8) = 1.8

Ke = Risk free rate + beta * market premium = 2+1.8*4 = 9.2%

ROE = Net Profit Margin * Asset Turnover * Leveragr Ratio = 0.05*2*2 = 20%

g = ROE * Retention Ratio = 0.2*0.4 = 8%

P = D8*(1+g)/(Ke-g) = 276*1.08/0.12 = $2484

Here is where I get stuck. For calculating ROE, I don't know how they got 2 as leverage ratio. What formula was used? Also, does this information in the problem get incorporated into finding the answer to the problem? There is a firm, which reinvests its profits back in itself. Consequently, it does not distribute any of its profit to the owners for the first 5 years. Afterward, it begins paying 46 per share for the sixth year. That rises by 200% for the 7^th year and by 100% for the 8^th. Beyond the 8^th year, it grows perpetually at a constant rate.