Here are data on two stocks, both of which have discount rates of 15%:                            Stock A       Stock B Return on equity 15%          12% Earnings per share $ 3.50    $ 2.40 Dividends per share$ 0.70    $ 0.70   Please see attached questions

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Here are data on two stocks, both of which have discount rates of 15%:
                           Stock A       Stock B
Return on equity 15%          12%
Earnings per share $ 3.50    $ 2.40
Dividends per share$ 0.70    $ 0.70

 

Please see attached questions

Here are data on two stocks, both of which have discount rates of 15%:
Stock AStock B
Return on equity
15%
12%
Earnings per share $ 3.50 $ 2.40
Dividends per share $ 0.70 $ 0.70
a. What are the dividend payout ratios for each firm? (Enter your answers as
a percent rounded to 2 decimal places.)
b. What are the expected dividend growth rates for each stock? (Do not
round intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places.)
c. What is the proper stock price for each firm? (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
Transcribed Image Text:Here are data on two stocks, both of which have discount rates of 15%: Stock AStock B Return on equity 15% 12% Earnings per share $ 3.50 $ 2.40 Dividends per share $ 0.70 $ 0.70 a. What are the dividend payout ratios for each firm? (Enter your answers as a percent rounded to 2 decimal places.) b. What are the expected dividend growth rates for each stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) c. What is the proper stock price for each firm? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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