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Two companies A and B have ROE 10% and 11%, respectively. The valuation of the two companies is in the table below: Earnings per
Two companies A and B have ROE 10% and 11%, respectively. The valuation of the two companies is in the table below: Earnings per share Dividend per share Share price Number of shares Earnings per share Dividend per share Table 1. Valuation of A and B Company: A Share price Number of shares Company: B 0.39 0.13 2.41 1,000,000 0.33 0.18 2.27 400,000 Calculate the sustainable growth rate for both A and B. Using the constant-growth dividend model, estimate the share price for both A and B. You may use the same growth rate that you calculated above and also assume a market capitalization rate of 13%. How your results will change if the forecasted growth for both companies is 14%? Comment on your results.
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