Problem $8-04$

You have been reading about the Madison Computer Company $($MCC$),$ which currently retains $81$ percent of its earnings $($$$8$ a share this year$).$ It earns an ROE of almost $34$ percent.

Assuming a required rate of return of $15$ percent, how much would you pay for MCC on the basis of the earnings multiplier model? Do not round intermediate calculations. Round your answer to the nearest cent. Enter zero if the obtained answer is economically meaningless.

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What would you pay for Madison Computer if its retention rate was $55$ percent and its ROE was $20$ percent? Do not round intermediate calculations. Round your answer to the nearest cent. Enter zero if the obtained answer is economically meaningless.

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