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In: Finance

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.)

PV

Stock A: _____%

Stock B:_____%

Solutions

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