Question: Constant-growth DCF model* Here are forecasts for next year for two stocks: Stock A Stock B ROI 15 10 EPS $2 $1.5 Div. PS $1

Constant-growth DCF model*

Here are forecasts for next year for two stocks:

Stock A

Stock B

ROI

15

10

EPS

$2

$1.5

Div. PS

$1

$1

a. What are the dividend payout ratios for each firm? b. What are the expected dividend growth rates for each stock?

c. If investors require a return of 15% on each stock, what are their values?

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