Here are data on two stocks, both of which have discount rates of 8%:
Stock A Stock B
Return on equity
8 % 5 % Earnings per share $ 2.60 $ 1.80
Dividends per share
$ 1.30 $ 1.30
What are the dividend payout ratios for each firm? (Enter your answers as a percent rounded to 2 decimal places.)
Stock A Stock B
Dividend payout ratios % %
What are the expected dividend growth rates for each firm? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Stock A Stock B Expected dividend growth rates % %
What is the proper stock price for each firm? (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 8%:
What are the dividend payout ratios for each firm? (Enter your answers as a percent rounded to 2 decimal places.) Stock A Stock B Dividend payout ratios % %
What is the proper stock price for each firm? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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Related questions
Consider four different stocks, all of which have a required return of 19 percent and a most recent dividend of $3.00 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent, and â5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 21 percent for the next two years and then maintain a constant 12 percent growth rate, thereafter.
What is the dividend yield for each of these four stocks? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| DIVIDEND YIELD | |
| Stock W | |
| Stock X | |
| Stock Y | |
| Stock Z |
What is the expected capital gains yield for each of these four stocks? (A negative answer should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Capital gains yield |
| Stock W | % |
| Stock X | % |
| Stock Y | % |
| Stock Z | % |
| Suppose Powers Ltd. just issued a dividend of $2.63 per share on its common stock. The company paid dividends of $2.13, $2.20, $2.37, and $2.47 per share in the last four years. |
| Required: |
| What was the dividend growth rate for each year? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Growth rate | |
| Year 1 | % |
| Year 2 | % |
| Year 3 | % |
| Year 4 | % |
| What were the arithmetic and geometric dividend growth rates over the past four years? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Cost of equity | |
| Arithmetic dividend growth rate | % |
| Geometric dividend growth rate | % |
| If the stock currently sells for $82, what is your best estimate of the companyâs cost of equity capital using arithmetic and geometric growth rates? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Cost of equity | |
| Arithmetic dividend growth rate | % |
| Geometric dividend growth rate | % |
