ABC corp pays an annual dividend of $5 on its preferred stock and the required return on the preferred stock is 10%. ABC corp just paid a dividend of $3 to its common stockholders and dividends are expected to grow at a constant rate of 10% per year and the required return on the common stock is 15%
What should the price of the preferred stock be today?
What should the price of the common stock be today?
You disagree with the growth rate information provided and believe that the growth rate for common dividends will be 50% this year, 20% the following year, and a constant rate of 10% thereafter. Based on these revised growth rates, what should the price of the common stock be today?