Market capitalization rate for each stock

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Reference no: EM131867824

Consider three stocks:

a. Stock A is expected to provide a dividend of $11 a share forever.

b. Stock B is expected to pay a dividend of $4.50 next year. Thereafter, dividend growth is expected to be 5% a year forever.

c. Stock C is expected to pay a dividend of $7 next year. Thereafter, dividend growth is expected to be 15% a year for five years (i.e., years 2 through 6) and zero thereafter.

If the market capitalization rate for each stock is 10%, which is most valuable?

1) Stock A

2) Stock B

3) Stock C

4) Not enough info

Reference no: EM131867824

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