Question
Consider the following three stocks: a. Stock A is expected to provide a dividend of $11.70 a share forever. b. Stock B is expected to
Consider the following three stocks: a. Stock A is expected to provide a dividend of $11.70 a share forever. b. Stock B is expected to pay a dividend of $6.70 next year. Thereafter, dividend growth is expected to be 6% a year forever. c. Stock C is expected to pay a dividend of $4.30 next year. Thereafter, dividend growth is expected to be 22% a year for five years (i.e., until year 6) and zero thereafter.
a-1. | If the market capitalization rate for each stock is 12%, 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? | ||||||
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b-1. | If the market capitalization rate for each stock is 9%, 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 | $ |
b-2. | Which stock is the most valuable? | ||||||
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