Problem 7-21 Constant-Growth Model (LO2)Here are data on two stocks, both of which have discount rates of 14%:Return on equityEarnings per shareStock A14%$ 1.50Stock B10%$ 1.40Dividends per share$ 1.20$ 1.20a. What is the dividend payout ratio for each firm?Note: Enter your answers as a percent rounded to 2 decimal places.Stock AStock BDividend payout ratios80.00 %85.71 %b. 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.Stock AStock BExpected dividend growth rates%%c. What is the value of each stock?Note: Do not round intermediate calculations. Round your answers to 2 decimal places.Stock AStock BStock price

Stock AReturn on equity (r) = 14% or 0.14EPS = $1.50Current Dividend (D0) = $1.20Discount rate (k) =…

Here are data on two stocks, both of which have discount rates of 14%: Return on equity Earnings per share Stock A 14% $ 1.50 Stock B 10% $ 1.40 Dividends per share $ 1.20 $ 1.20 a. What is the dividend payout ratio for each firm? Note: Enter your answers as a percent rounded to 2 decimal places. Stock A Dividend payout ratios 80.00 % Stock B 85.71% b. 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. Stock A Stock B Expected dividend growth rates % c. What is the value of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock A Stock B Stock price _

Here are data on two stocks, both of which have discount rates of 14%: Return on equity Earnings per share Stock A 14% $ 1.50 Stock B 10% $ 1.40 Dividends per share $ 1.20 $ 1.20 a. What is the dividend payout ratio for each firm? Note: Enter your answers as a percent rounded to 2 decimal places. Stock A Dividend payout ratios 80.00 % Stock B 85.71% b. 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. Stock A Stock B Expected dividend growth rates % c. What is the value of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock A Stock B Stock price _

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 1DTM

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