Hat is the fair price of stock

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Reference no: EM132030621

Consider two companies, named A and B, that are identical in every respect except that A will grow at 5% and B at 3%. Investors require a12% return for both companies, next year EPS are expected to be $1.00 for both companies and the dividend payout rate is 30%.

Part 1: What is the fair price of stock A?

Part 2: What is the price of stock A if you use P/E ratio of stock B to determine the price of stock A?

Reference no: EM132030621

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