Problem $7-38$ P$/$E Ratios $($LO$2)$

Web Cites Research projects a rate of return of $20\%$ on new projects. Management plans to plow back $20\%$ of all earnings into the

firm. Earnings this year will be $$6$ per share, and investors expect a rate of return of $12\%$ on stocks facing the same risks as Web Cites.

a$.$ What is the sustainable growth rate?

b$.$ What is the stock price?

c$.$ What is the present value of growth opportunities $($PVGO$)?$

d$.$ What is the P$/$E ratio?

e$.$ What would the price and $\frac{P}{E}$ ratio be if the firm paid out all earnings as dividends?

Note: Do not round intermediate calculations. Round your answers to $2$ decimal places.