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The opportunity cost of capital (also known as the market capitalization rate) is 10 percent. Which stock has a greater value? (a) Stock A is
The opportunity cost of capital (also known as the market capitalization rate) is 10 percent. Which stock has a greater value? (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 percent a year forever. _____________
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