Author Question: Stocks A and B have the same required return of 20% and the same price, $30. Stock As dividend is ... (Read 42 times)

dusk108 · **on:** Aug 7, 2023

Stocks A and B have the same required return of 20% and the same price, $30. Stock A’s dividend is expected to grow at a constant rate of 4% per year, while Stock B’s dividend is expected to grow at a constant rate of 16% per year. Which of the following statements is correct?

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Since Stock B’s growth rate is four times that of Stock A, Stock A’s future dividends will always be four times as high as Stock B’s.

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Stock A has a lower dividend yield than Stock B.

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Currently the two stocks have the same price, but over time Stock A’s price will pass that of Stock B.

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Stock A’s expected dividend at t = 1 is four times that of Stock B.

jbsuccess1 · **Reply #1 on:** Aug 7, 2023

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