Here are data on two stocks, both of which have discount rates of 15%:
Stock A Stock B
Return on equity... 15.00% 10.00%
Earnings per share... $2.00 $1.50
Dividends per share. $1.00 $1.00
Discount Rates..... 15.00% 15.00%
a. What are the dividend payout ratios for each firm?
b. What are the expected dividend growth rates for each firm?
c. What is the proper stock price for each firm?