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There are only 2 investment options: share A or B. Company A has a current share price of $1.25 and is expected to pay an
There are only 2 investment options: share A or B. Company A has a current share price of $1.25 and is expected to pay an annual dividend of $0.15 next year. The dividend is expected to remain constant forever. Company B recently paid a dividend of $0.20 and this dividend is expected to grow at 5% p.a. forever. What should the price of Company B's shares be if their risk levels and the risk/returns trade-off of the two companies are the same? Select one: O A. $3.00 O B. $1.24 O C. $4.00 O D. $2.86
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