You have information about three stocks: 1) Stock A is expected to provide a dividend...
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You have information about three stocks: 1) Stock A is expected to provide a dividend of $12 a share forever 2) Stock B is expected to pay a dividend of $8 next year. Thereafter, the company expects that the dividend will grow constantly by 3% a year. 3) Stock C is expected to pay a dividend of $6.5 next year. Thereafter, dividend growth is expected to be 18% a year for 5 years (from year 2 to 6) and zero growth thereafter. If the required return for each stock is 7.5%, calculate the value of each stock and find out which stock is the most valuable?
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