Stocks A and B have the same required return and the same price, $25. Stock A's dividend
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Question:
Stocks A and B have the same required return and the same price, $25. Stock A's dividend is expected to grow at a constant rate of 10% per year, while Stock B's dividend is expected to grow at a constant rate of 5% per year. Which of the following statements is correct?
Select one:
a. Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.
b. Stock A's expected dividend at t = 1 is only half that of Stock B.
c. Currently the two stocks have the same price, but over time Stock B's price passes that of Stock A.
d. Stock A has a higher dividend yield than Stock B.
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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