Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.25 next year. The

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Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.25 next year. The growth rate in dividends for all three companies is 4 percent. The required return for each company’s stock is 8 percent, 11 percent, and 14 percent, respectively. What is the stock price for each company? What do you conclude about the relationship between the required return and the stock price?

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Fundamentals of Corporate Finance

ISBN: 978-0077861704

11th edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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