GM 2. You are an analyst for a U.S. pension fund. Your supervisor has asked you to value the stocks of General Electric (GE) and General Motors (GM). The supervisor wants you to evaluate the appropriateness of the dividend discount model (DDM) for valuing GE and GM and she has compiled the following data for the two companies for 2000 through 2007. GE Year EPS ($) DPS ($) Payout Ratio EPS ($) DPS ($) 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 1.13 2000 1.27 0.57 0.45 6.68 2.00 0.30 Briefly explain whether the DDM is appropriate for valuing each stock. 2.00 3. J & J paid out 36% of its earnings as dividends in 2021. It earned a net income of $1,625 million on a book value of equity of $5,171 million. It is expected that the return on equity will drop to 25% in 2022 and that the dividend payout ratio will remain unchanged. A. Estimate the growth rate in earnings based upon 2021 numbers. B. Estimate the growth rate in 2022, when the ROE drops to 25%