Solved: What are the dividend payout ratios for each firm, Finance Basics

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What are the dividend payout ratios for each firm

Problem: 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: What are the dividend payout ratios for each firm

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