Castles in the Sand generates a rate of return of 15% on its investments and maintains a plowback ratio of .20. Its earnings this year will be $2 per share. Investors expect a 12% rate of return on the stock.
a. Find the price and P/E ratio of the firm. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. Find the price and P/E ratio of the firm, if the plowback ratio is reduced to .10? (Do not round intermediate calculations. Round your answers to 2 decimal places.)