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		12	%		10	%
Earnings per share	$	3.00		$	2.50
Dividends per share	$	2.00		$	2.00

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 Rate

Stock A: ____%

Stock B: _____%

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.)

Growth Rate

Stock A: _____%

Stock B:_____%

c. If investors require a return of 12% on each stock, what are their values? (Do not round intermediate calculations. Round final answers to 2 decimal places.)

Stock A: _____%

Stock B:_____%

Solutions

Expert Solution

jeff jeffy answered 4 months ago

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