Problem 4-13 Constant-growth DCF model Here are forecasts for next year for two stocks:

Stock A

Stock B

Return on equity 16 % 15 %

Earnings per share $ 2.00 $ 1.50

Dividends per share $ 1.00 $ 1.00

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.)

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.)