Consider three stocks:
a. Stock A is expected to provide a dividend of $11 a share forever.
b. Stock B is expected to pay a dividend of $4.50 next year. Thereafter, dividend growth is expected to be 5% a year forever.
c. Stock C is expected to pay a dividend of $7 next year. Thereafter, dividend growth is expected to be 15% a year for five years (i.e., years 2 through 6) and zero thereafter.
If the market capitalization rate for each stock is 10%, which is most valuable?
1) Stock A
2) Stock B
3) Stock C
4) Not enough info