Consider the following three stocks: 1. Stock A is expected to provide a dividend of $10.40 a share forever. 2. Stock B is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 2.00% a year forever. 3. Stock C is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 18.00% a year for five years (years 2 through 6, as C recovers from a severe recession) and zero thereafter. a-1. If the cost of equity for each stock is 8.00%, what is the stock price for each of the stocks? a-2. Which stock is the most valuable? b-1. If the cost of equity for each stock is 5.00%, what is the stock price for each of the stocks? b-2. Which stock is the most valuable? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 If the cost of equity for each stock is 5.00%, what is the stock price for each of the stocks? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock Price Stock A $ 208.00 Stock B $ 180.00 Stock C $ 226.44 < Req A2 Req B2 >
Consider the following three stocks: 1. Stock A is expected to provide a dividend of $10.40 a share forever. 2. Stock B is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 2.00% a year forever. 3. Stock C is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 18.00% a year for five years (years 2 through 6, as C recovers from a severe recession) and zero thereafter. a-1. If the cost of equity for each stock is 8.00%, what is the stock price for each of the stocks? a-2. Which stock is the most valuable? b-1. If the cost of equity for each stock is 5.00%, what is the stock price for each of the stocks? b-2. Which stock is the most valuable? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 If the cost of equity for each stock is 5.00%, what is the stock price for each of the stocks? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock Price Stock A $ 208.00 Stock B $ 180.00 Stock C $ 226.44 < Req A2 Req B2 >
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please correct answer and don't use hend raiting
Transcribed Image Text:Consider the following three stocks:
1. Stock A is expected to provide a dividend of $10.40 a share forever.
2. Stock B is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 2.00% a
year forever.
3. Stock C is expected to pay a dividend of $5.40 next year. Thereafter, dividend growth is expected to be 18.00% a
year for five years (years 2 through 6, as C recovers from a severe recession) and zero thereafter.
a-1. If the cost of equity for each stock is 8.00%, what is the stock price for each of the stocks?
a-2. Which stock is the most valuable?
b-1. If the cost of equity for each stock is 5.00%, what is the stock price for each of the stocks?
b-2. Which stock is the most valuable?
Complete this question by entering your answers in the tabs below.
Req A1
Req A2
Req B1
Req B2
If the cost of equity for each stock is 5.00%, what is the stock price for each of the stocks?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Stock Price
Stock A
$
208.00
Stock B
$
180.00
Stock C
$
226.44
< Req A2
Req B2 >
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