What are the prices of stock

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I need the answer and work to each question and subpart Consider the following two stocks:

A: Stock A is expected to provide a dividend of $15 a share forever.

B: Stock B is expected to pay a dividend of $8 next year. Thereafter, dividend growth is

expected to be 20% a year for four years (i.e., until year 5) and 0% thereafter.

a) What are the prices of each stock if the appropriate discount rate for each stock is 6%? Which stock is the most valuable?

b) What are the prices of each stock if the appropriate discount rates are as follows: for the first five years, the rate is 6%, and then 12% thereafter? Which stock is the most valuable?

Reference no: EM133069979

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