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The preferred stock of ABC pays a constant $2.5 per share dividend. The common stock of ACME just paid a $1.5 dividend per share, but
The preferred stock of ABC pays a constant $2.5 per share dividend. The common stock of ACME just paid a $1.5 dividend per share, but its dividend is expected to grow at 4 percent per year forever All two stocks have a 7 percent required return. How much should you be willing to pay for a share of each stock? Which stock will give you the best return? Explain what is the relationship between dividend growth and the price of a stock. Please show all your work.
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