Two companies, A and B, both have constant expected dividend growth rates and expected equity returns. They also have the same price to dividend ratios. Company A has per-share price of $25 and per-share annual dividend of $1.

1. If Company B currently pays annual dividends of $2.50 per share, what must its current per-share price be?

2. True or false: because A and B have the same P/D ratio, and we can thus value each using the other as a comparable, MUST they have the same expected return? Explain. **I am confused about question 2. When using the Gordon Growth Model, am I supposed to assume they have the same growth rate, or can they have different growth rates, and thus different expected returns?**