Consider two companies named a and b that are identical in, Ask an Expert

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Consider two companies, named A and B, that are identical in every respect except that A will grow at 5% and B at 3%. Investors require a12% return for both companies, next year EPS are expected to be $1.00 for both companies and the dividend payout rate is 30%.

Part 1: What is the fair price of stock A?

Part 2: What is the price of stock A if you use P/E ratio of stock B to determine the price of stock A?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92867273

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