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?