Consider the following three stocks: Stock A is expected to provide a dividend of $11.10 a share
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Question:
Consider the following three stocks:
- Stock A is expected to provide a dividend of $11.10 a share forever.
- Stock B is expected to pay a dividend of $6.10 next year. Thereafter, dividend growth is expected to be 5.00% a year forever.
- Stock C is expected to pay a dividend of $4.90 next year. Thereafter, dividend growth is expected to be 21.00% a year for five years (i.e., years 2 through 6) and zero thereafter.
a-1.If the market capitalization rate for each stock is 11.00%, what is the stock price for each of the stocks?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
a-2.Which stock is the most valuable?
b-1.If the market capitalization rate for each stock is 8.00%, what is the stock price for each of the stocks?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
b-2.Which stock is the most valuable?
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