The Sicamous Company and the Revelstoke Company are two firms whose business risk is the same but

Question:

The Sicamous Company and the Revelstoke Company are two firms whose business risk is the same but that have different dividend policies. Sicamous pays no dividend, whereas Revelstoke has an expected dividend yield of 4 percent. Suppose the capital gains tax rate is zero, whereas the income tax rate is 35 percent. Sicamous has an expected earnings growth rate of 15 percent annually, and its stock price is expected to grow at this same rate. If the after-tax expected returns on the two stocks are equal (because they are in the same risk class), what is the pre-tax required return on Revelstoke’s stock?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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