Question
Two chemical corporations, both equity financed with no debt, are essentially in the same business. However, whereas one of the corporations has a stable earnings
Two chemical corporations, both equity financed with no debt, are essentially in the same business. However, whereas one of the corporations has a stable earnings and dividend record, paying out all its earnings in dividends, the other is a growth stock increasing its earnings and dividends annually through a different management strategy. The current dividend is $5 per share for both corporations. The stable corporation's stock trades for $40 per share and the price of the growth stock is $50.
Estimate the investors' required rate of return on these stocks and the steady future growth rate of the growing corporation as perceived by the market.
if someone can do this and show me how its done i would greatly appreciate it
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