Castles in the Sand generates a rate of return of 10% on its investments and maintains a plowback ratio of 0.20. Its earnings this year will be $4 per share. Investors expect a rate of return of 8% 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 0.10. (Do not round intermediate calculations. Round your answers to 2 decimal places.)