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Assume that the dividend and its constant growth rate of the two stocks A and B are as shown in the following table. Stock Dividend
Assume that the dividend and its constant growth rate of the two stocks A and B are as shown in the following table. Stock Dividend (D1) Constant growth% A 0.80 3% B 0.20 12% Suppose that the required return is 15% for both stocks. If you expect a 1%-point decline in growth, which of the following statements is correct? The impact of the decline in growth is lower for Stock A, because lower proportion of its value comes from dividend in far future. The impact of the decline in growth is lower for Stock B, because higher proportion of its value comes from dividend in far future. The impact of the decline in growth is higher for Stock A, because higher proportion of its value comes from dividend in far future. "The impact of the decline in growth is higher for Stock B, because lower proportion of its value comes from dividend in far future." O None of the above
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