3. 9.

Share Valuation and Required Return [LO 8.1] Red Limited, Yellow Corporation and Blue Company each will pay a dividend of $3.65 next year.

The growth rate in dividends for all three companies is 4 per cent. The required return for each company’s shares is 8 per cent, 11 per cent and 14 per cent, respectively. What is the share price for each company? What do you conclude about the relationship between the required return and the share price?