please answer part (c) and show the formula used to calculate thereturn on investment interest rate

1. NG Incorp expects earnings this year of $5 per share, and it plans to pay a $3 dividend to shareholders. NG will retain $2 per share of its earnings to reinvest in new projects with an expected return of 15% per year. Suppose NG will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. (a) What growth rate of earnings would you forecast for NG? (10%) (b) If NG's equity cost of capital is 12%, what price would you estimate for NG stock? If the market price of the stock is $40, what is your investment decision? [20%] What is the implied rate of return on the investment? What does this imply for stock valuation? [20%] (d) Suppose NG instead paid a dividend of $4 per share this year and retained only $1 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If NG maintains this higher payout rate in the future, what stock price would you estimate now? Should NG follow this new policy? (10%) (e) Based on your answers in parts (b) and (d), explain why in reality a dividend cut is almost always companied by steep drops in stock price. Does this contradict with the dividend discount model? [20%] Suppose there is an upturn in the economy so investors alter their view of future dividend growth by a mere 1% pa. Use the results obtained from part (b), show why the stock prices will be highly volatile even though all investors act in a perfectly rational way. [20%]