Total Return $=$ ke $=$ Dividend Yield $($DY$)+$ Capital Gains Yield $($CGY$)$

$=$ D$1/$P$0+($P$1$ P$0)/$P$0=$ D$1/$P$0+$ g

Estimation of the Growth Rate $($g$)$: g $=$ Retention Ratio $*$ ROE

Question $2$: Assume that a firm has earnings per share of $$6\mathrm{.}00($next period $$ time $1),$ has a retention ratio of $($which also means they have a payout ratio of $.$ The retention ratio is equal to $1$ payout ratio$),$ faces an equity discount rate of $15\%$ and a return on equity of $18\%.$ What is the appropriate estimate of the firm's price?