Amy Tanner is an analyst for a US pension fund. Her supervisor has asked her to value the stocks of General Electric (GE) and General Motors (GM). Tanner wants to evaluate the appropriateness of the dividend discount model (DDM) for valuing GE and GM and has compiled the following data for the two companies for 2000 through 2007.Amy Tanner is an analyst for a US pension fund. Her supervisor has asked her to value the stocks of General Electric (GE) and General Motors (GM). Tanner wants to evaluate the appropriateness of the dividend discount model (DDM) for valuing GE and GM and has compiled the following data for the two companies for 2000 through 2007.Amy Tanner is an analyst for a US pension fund. Her supervisor has asked her to value the stocks of General Electric (GE) and General Motors (GM). Tanner wants to evaluate the appropriateness of the dividend discount model (DDM) for valuing GE and GM and has compiled the following data for the two companies for 2000 through 2007.

For each of the stocks, explain whether the DDM is appropriate for valuing the stock.

GE GM Year EPS ($) DPS ($) Payout Ratio EPS () DPS (s) Payout Ratio 2007 2.17 1.15 0.53 -68.45 1.00 -0.01 2006 1.99 1.03 0.52 -3.50 1.00 -0.29 2005 1.76 0.91 0.52 -18.50 2.00 -0.11 2004 1.61 0.82 0.51 4.94 2.00 0.40 2003 1.55 0.77 0.50 5.03 2.00 0.40 2002 1.51 0.73 0.48 3.35 2.00 0.60 2001 1.41 0.66 0.47 1.77 2.00 1.13 2000 1.27 0.57 0.45 6.68 2.00 0.30