Answer:
Please sew solution below
Explanation:
a. What are the dividend payout ratios for each firm
Dividend payout ratio = Dividend / EPS
• Payout ratio stock A = $1.30 / $2.6 = 0.5= 50%
• Payout ratio stock B = $1.3 / $1.8 = 0.72222 = 72.22%
b. What are the expected dividend growth rates for each stock.
Growth rate = ROE × (1 - dividend payout ratio)
•Growth rate stock A = 0.08 × (1 - 50%) = 0.04 = 4%
• Growth rate stock B = 0.05 × (1 - 72.22%) = 0.01389 = 1.39%
c. What is the proper stock price for each firm
• Stock A
Price = D1 / (Re - g)
D1= $1.30 * (1 + 0.04)
= 1.352
Stock B
Price = D1 / (Re - g)
D1= $1.30 * (1 + 0.013)
= 1.3169
Therefore,
• Stock A's proper price = $1.352 / (0.08 - 0.04) = $33.8
• Stock B's proper price = $1.3169 / ($0.08 - $0.013) = $19.66
The right answer for the question that is being asked and shown above is that: "d) All answers are correct." The situation that could have tipped Elise of is that of requiring a free course on money management; charging large monthly fees for the service;<span> asking her to cancel most of her credit cards</span>
<span>$11,320 with its interest rate over the year will be $13659.84. If Francine paid $436 each month for a year he would have paid off $5232 in a year. His debt balance would still be remanding at $8427.84. Francine will have paid off a large amount of his payment plan with the company however he will still be required to spend 18 months or so to pay back what he owes as there was a a 20.67% interest sum added to his payment plan with the company.</span>