Question

Here are forecasts for next year for two stocks:

Stock A |
Stock B |
|||||

Return on equity | 15 | % | 14 | % | ||

Earnings per share | $ | 2.00 | $ | 1.50 | ||

Dividends per share | $ | 1.00 | $ | 1.00 | ||

**a.** What are the dividend payout ratios for each
firm? **(Do not round intermediate calculations. Enter your
answers as a percent rounded to the nearest whole
number.)**

**b.** What are the expected dividend growth rates for
each stock? Assume dividend has a steady growth for both stocks.
**(Do not round intermediate calculations. Enter your answers
as a percent rounded to 2 decimal places.)**

**c.** If investors require a return of 15% on each
stock, what are their values? **(Do not round intermediate
calculations. Round final answers to 2 decimal
places.)**

Answer #1

Calculation is given in the below attached image

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Here are forecasts for next year for two stocks:
Stock A
Stock B
Return on equity
12
%
10
%
Earnings per share
$
4.00
$
3.50
Dividends per share
$
3.00
$
3.00
a. What are the dividend payout ratios for each
firm? (Do not round intermediate calculations. Enter your
answers as a percent rounded to the nearest whole
number.)
payout ratio %
Stock A
Stock B
b. What are the expected dividend growth rates
for each stock? Assume...

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State of
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Return on
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Return on
Stock B
Bear
.111
-.054
Normal
.106
.157
Bull
.082
.242
Assume each state of the economy is equally likely to
happen.
Calculate the expected return of each of the following stocks.
(Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return
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%
Stock B...

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State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.119
-.062
Normal
.098
.165
Bull
.090
.250
Assume each state of the economy is equally likely to happen.
Calculate the expected return of each stock. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)
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Stock A
______%
Stock B
______%
Calculate the standard deviation of each stock. (Do not...

Based on the following information:
State of Economy
Probability of State of Economy
Return on Stock J
Return on Stock K
Bear
.20
-.010
.044
Normal
.55
.148
.072
Bull
.25
.228
.102
A. Calculate the expected return for each of the
stocks. (Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return:
Stock J
Stock K
B. Calculate the standard deviation for each of the stocks. (Do
not round...

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Consider four different stocks, all of which have a required
return of 20 percent and a most recent dividend of $5.10 per share.
Stocks W, X, and Y are expected to maintain constant growth rates
in dividends for the foreseeable future of 10 percent, 0 percent,
and –5 percent per year, respectively. Stock Z is a growth stock
that will increase its dividend by 20 percent for the next two
years and then maintain a constant 9 percent growth rate...

You are given the following information:
State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.109
−
.052
Normal
.108
.155
Bull
.080
.240
Assume each state of the economy is equally likely to happen.
Calculate the expected return of each stock. (Do not round
intermediate calculations. Enter your answers as a percent rounded
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Stock A
9.90 Correct %
Stock B
14.90 Incorrect %
Calculate the standard deviation...

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