Here are data on two stocks, both of which have discount rates of 10%: Return on

ID: 2775563 • Letter: H

Question

Here are data on two stocks, both of which have discount rates of 10%:

Return on Equity Stock A: 10% Stock B: 8%

Earnings per share Stock A: $2.50 Stock B: $1.50

Dividends per share Stock A: $1.00 Stock B: $1.00

What are the dividend payout ratios for each firm? Enter your answer as a percent rounded to 2 decimal places.

Dividend Payout Ratio: Stock A:

Dividend Payout Ratio: Stock B:

(.40/.67 are incorrect)

What is the proper stock price for each firm? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Stock Price: Stock A:

Stock Price: Stock B:

(26.50/14.00 are incorrect)

Explanation / Answer

Particulars Stock A Stock B Earnings per share 2.50 1.50 Dividend per share 1.00 1.00 Dividend Payout Ratio(Div/ EPS*100) 40.00% 66.67% Note: Answer should be in % Discount Rate 10% 10% Dividend per share 1.00 1.00 Stock Price = Dividend/ke-g 10.00 10.00

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Here are data on two stocks, both of which have discount rates of 14%: What are

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Here are data on two stocks, both of which have discount rates of 10%: Return on

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