Dividend based problems, Stock X has a required return of

Dividend based problems

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Reference no: EM1366507

Stock X has a required return of 12%, a dividend yield of 5%, and its dividend will incease at a constant rate forever. Stock Y has a required return of 10%, a dividend yield of 3%, and its dividend will grow at a constant rate forever. Both stocks currently sell for $25 per share. Which of the following statements is most correct?

a.Stock X pays a higher dividend per share than stock Y.
b.Stock X has a lower expected growth rate than stock Y.
c.One year from now, the two stocks are expected to trade at the same price.
d.Statements a and b are correct
e.Statements a and c are correct.

Reference no: EM1366507

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