Question
Dividend Practice Question Beth Knight, CFA, and David Royal, CFA, are independently analyzing the value of Bishop, Inc. stock.Bishop paid a dividend of $1 last
Dividend Practice Question
Beth Knight, CFA, and David Royal, CFA, are independently analyzing the value of Bishop, Inc. stock.Bishop paid a dividend of $1 last year.Knight expects the dividend to grown by 10% in each of the next 3 years after which it will grow at a constant rare of 4% per year.Royal also expects temporary growth grate of 10% followed by a constant growth rate of 4%, but he expects the supernormal growth to last for only 2 years.Knight estimates that the RR on Bishop stock is 9%, but Royal believes the RR is 10%.Royal's valuation of Bishop stock is approximately:
A. equal to Knight's valuation
B. $5 less than Knight's valuation
C. $5 more than Knight's valuation.
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