Should you invest in the common shares of trenton

Reference no: EM133326423

The common shares of Trenton Ltd., which are currently trading at $12.50, paid a dividend of $1.50 per share during the past year. Investment analysts have informed you that the historical growth rate for its common share dividends of 2% is expected to continue for the foreseeable future, that the firm's beta is 1.7, and that reasonable estimates for the risk-free rate of return and the expected market return are 3% and 9%, respectively.

Alternatively, the common shares of Bellville Inc. have a current market price of $10 per share and investment analysts have informed you that the share price is expected to be $10.50 in 1 year, that the shares are expected to pay a dividend of $1 per share over the next year, and that their beta is 0.75.

Question: Should you invest in the common shares of Trenton or the common shares of Bellville? Explain and support your answer with calculations.

Reference no: EM133326423

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