You are provided with the following data on ABC Inc. The company has stable earnings growth of 4% per annum and maintains a constant dividend pay-out ratio. The ratios below are calculated using todays 2019 estimated earnings and balance sheet data. ABC Inc. Based on 2019 Estimates Price/Earnings (P/E) 11.4 Dividend cover 2.0 (a) Use the constant growth dividend discount model and the P/E to calculate the consensus cost of equity for ABC Inc. (b) Calculate the return on equity for ABC Inc. and comment on whether the firm is value adding or value destroying. (c) If ABC Inc. were to increase its dividend pay-out ratio to 0.7 calculate and explain the impact on the P/E ratio (assume the firms return on equity and cost of equity are constant). (d) You are comparing the companys valuation with that of an overseas competitor which Uses different accounting practices. Explain the disadvantages of relying on P/Es and suggest another valuation ratio you might use to avoid these disadvantages, (e) Calculate ABC Inc.s price earnings growth (PEG) ratio and if the sector average PEG ratio is 2, comment on the PEG ratio for ABC Inc.