Assume there are 3 companies that in the past year paid exactly the same annual dividend of

Question:

Assume there are 3 companies that in the past year paid exactly the same annual dividend of $2.25 a share. In addition, the future annual rate of growth in dividends for each of the 3 companies has been estimated as follows:

image text in transcribed
Assume also that as the result of a strange set of circumstances, these 3 companies all have the same required rate of return (r = 10%).
a. Use the appropriate DVM to value each of these companies.
b. Comment briefly on the comparative values of these 3 companies. What is the major cause of the differences among these 3 valuations?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Fundamentals of Investing

ISBN: 978-0133075359

12th edition

Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk

Question Posted: