Question

Here are forecasts for next year for two stocks: Stock A Stock B Return on equity...

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.)

Homework Answers

Answer #1

Calculation is given in the below attached image

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