Answer: 8.3.

## Explanation The justified leading P/E ratio can be calculated using the Gordon growth model: \[ \frac{P_0}{E_1} = \frac{D_1/E_1}{r - g} \] Where: - \( r \) = required return on equity = 10.3% = 0.103 - \( g \) = dividend growth rate = 5.2% = 0.052 - \( D_0 \) = current dividend = $1.00 - \( E_0 \) = trailing EPS = $2.50 First, calculate \( D_1 \): \[ D_1 = D_0 \times (1 + g) = 1.00 \times 1.052 = 1.052 \] Next, calculate \( E_1 \): \[ E_1 = E_0 \times (1 + g) = 2.50 \times 1.052 = 2.63 \] Now calculate the payout ratio: \[ \frac{D_1}{E_1} = \frac{1.052}{2.63} = 0.40 \] Finally, calculate the justified leading P/E: \[ \frac{P_0}{E_1} = \frac{0.40}{0.103 - 0.052} = \frac{0.40}{0.051} = 7.84 \] The justified leading P/E ratio is closest to 7.8, which corresponds to option A. **Answer: A**

Author: LeetQuiz Editorial Team