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Item 4

Problem 7-21 Constant-Growth Model (LO2)

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	$ 3.00	$ 2.30
Dividends per share	$ 1.80	$ 1.80

What is the dividend payout ratio for each firm?

Note: Enter your answers as a percent rounded to 2 decimal places.

What is the expected dividend growth rate for each stock?

Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.

What is the value of each stock?

Note: Do not round intermediate calculations. Round your answers to 2 decimal places.