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    Computation of Stock price and other ratios

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    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

    What are the dividend payout ratios for each firm?
    What are the expected dividend growth rates for each firm?
    What is the proper stock price for each firm?

    done in excel spread sheet with formulas for each answer.

    © BrainMass Inc. brainmass.com June 3, 2020, 8:26 pm ad1c9bdddf
    https://brainmass.com/business/financial-ratios/computation-of-stock-price-and-other-ratios-138011

    Solution Preview

    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 ...

    Solution Summary

    This explains the computation of dividend payout ratios, expected dividend growth rates for each firm and the proper stock price

    $2.19

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