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?
Categories: