Problem 4-13 Constant-growth DCF model Here are forecasts for next year for two stocks: Stock A Stock
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Question:
Problem 4-13 Constant-growth DCF model
Here are forecasts for next year for two stocks:
Stock A
Stock B
Return on equity15%12%Earnings per share$4.00$3.50Dividends per share$3.00$3.00
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.)
c.If investors require a return of 15% on each stock, what are their values?(Do not round intermediate calculations. Round final answers to 2 decimal places.)
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