High Growth Period: Growth rate during period = 10% Payout rate during period = 40%...
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Finance
High Growth Period:
Growth rate during period = 10%
Payout rate during period = 40%
Stable Growth Period:
Growth rate during period = -1%
Payout rate during period = 80%
Please assume all other inputs remain unchanged. Please show your work.
There are two stocks. Assume a capitalization rate of 10%.
Stock A is expected to pay a dividend of $15 next year. Thereafter, dividend growth is expected to be -2% per annum forever (note that dividends are declining).
Stock B is expected to pay a dividend of $15 next year. Thereafter, dividend growth is expected to be 2% a year for 5 years (i.e., until year 6) and zero thereafter.
If the market capitalization rate is 10%, which stock is the more valuable? Show your work.
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