Economics Homework Solutions
#123521
Stock price using - Constant Growth Model
Constant-Growth Model. Here are data on two stocks, both of which have discount rates of 15%:
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?
This solution is comprised of a detailed calculation to answer the dividend payout ratios, expected dividend growth rates, and stock price.
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Kao-wen Peng, MBA - 4.9/5
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- Stock price - Constant Growth Model with ROE.doc
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