Suppose that Gordon growth model (dividend discount model ) is correctly price stocks and that the companies
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Question:
Suppose that Gordon growth model (dividend discount model ) is correctly price stocks and that the companies that issued the following stocks exist infinitely. we are assumed to be at the beginning of this year. which of the following stock has the highest price?
a. $2 dividends ( per share) are just paid. The dividends are paid at the end of every year, and grow at the constant rate of 3%. The required return for this stock is 9%.
b. $2 dividends ( per share) will be paid tomorrow. The dividends are paid at the end of every year, and grow at the constant rate of 5%. The required return for this stock is 9%.
c. $2 dividends ( per share) are just paid. The dividends are paid at the end of every year, and grow at the constant rate of 5%. The required return for this stock is 20%.
d. $2 dividends ( per share) will be paid tomorrow. The dividends are paid at the end of every year, and grow at the constant rate of 3%. The required return for this stock is 20%.
e. $2 dividends ( per share) are just paid. The dividends are paid at the end of every year, and grow at the constant rate of 5%. The required return for this stock is 9%.
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