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Consider the following three stocks: a. Stock A is expected to provide a dividend of $10 a share forever. b. Stock B is expected to
Consider the following three stocks: a. Stock A is expected to provide a dividend of $10 a share forever. b. Stock B is expected to pay a dividend of $5 next year. Thereafter, dividend growth is expected to be 4% a year forever. c. Stock C is expected to pay a dividend of $5 next year. Thereafter, dividend growth is expected to be 20% a year for five years (i.e., years 2 through 6) and zero thereafter. a-1. If the market capitalization rate for each stock is 10%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock Price Stock A Stock B Stock C a-2. Which stock is the most valuable? O Stock A O Stock B Stock C b-1. If the market capitalization rate for each stock is 7%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock Price $ 142.86 Stock A Stock B $ 71.39 Stock C b-2. Which stock is the most valuable? O Stock A O Stock B O Stock C
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