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Constant-growth model based problem

Problem: Constant -Growth Model: Here are data on two stocks, both of which have discount rates of 15 percent.

Stock A: Stock B:
Return on Equity 15% 10%
Earnings per share $2.00 $1.50
Dividends per share $1.00 $1.00

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?

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Finance Basics: Constant-growth model based problem

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