Below are the data for two stocks, both of which have a discount rate of 9 percent:

Stock A Stock B

Discount Rate 9% 10%

Return on equity 12% 11%

Earnings per share (time 1) $ 0.90 $3.40

Dividends per share (time 1) $ 0.25 $2.50

a. What are the dividend payout ratios for each company?

b. What are the expected dividend growth rates for each company?

c. What is the estimated stock price for each company?

d. What is the P/E ratio for each company?

e. Which stock has the higher market value of equity?