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  • Jun 20, 2007, 06:43 PM
    atapprich
    Constant growth model
    Two stocks both 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

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