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A person is considering buying the stock of two home health companies that are similar in all respects except the proportion of earnings paid out
A person is considering buying the stock of two home health companies that are similar in all respects except the proportion of earnings paid out as dividends. Both companies are expected to earn $6 per share in the coming year, but Company D(for dividends) is expected to pay out the entire amount as dividens, while Company G (for growth) is expected to pay out only one third of its earnings or $2 per share. The companies are equally risky and their requred rate of return is 1%. D's constant growth rate is zero and G's is 8.33%. What are the intrinsic values of stocks D and G
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