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QUESTION

1. The opportunity cost of capital is 10%. Which stock has the greater value?

1. The opportunity cost of capital is 10%. Which stock has the greater value?

a.) Stock A is expected to provide a dividend of $10 a share forever.

b.)  Stock B is expected to pay a dividend of $5 next year. Thereafter, dividend growth is expected to be 4 percent a year forever.  

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