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Consider the following three stocks: Stock A is expected to provide a dividend of $11.40 a...

Consider the following three stocks:

  1. Stock A is expected to provide a dividend of $11.40 a share forever.
  2. Stock B is expected to pay a dividend of $6.40 next year. Thereafter, dividend growth is expected to be 2.00% a year forever.
  3. Stock C is expected to pay a dividend of $4.60 next year. Thereafter, dividend growth is expected to be 18.00% a year for five years (i.e., years 2 through 6) and zero thereafter.

a-1. If the market capitalization rate for each stock is 8.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Stock Price
Stock A $
Stock B $
Stock C $

a-2. Which stock is the most valuable?

Stock C
Stock B
Stock A

b-1. If the market capitalization rate for each stock is 5.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Stock Price
Stock A $
Stock B $
Stock C $

b-2. Which stock is the most valuable?

Stock B
Stock A
Stock C
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