1) Using the dividend valuation model, the value of company A's stock will be lower than the value of Company B's stock.
2) Other things being equal, if Company A and Company B have the same firm value, Company B must have more debt, thus leveraging its returns for the benefit of shareholders.
3) Other things being equal, if Company A and Company B have the same firm value, Company A may have more shares of stock outstanding than Company B.
4) Company B's required rate of return is higher than Company A's required return.
Recently Asked Questions
- A manager has a $250 million portfolio that consists of 40% stock and 60% bonds. The beta of the stock position is 1.4. The modified duration of the bond
- Please, help with checking my answers. I don't know if I am doing the assignment correctly..... Thank you. Absolute and Comparative Advantage Use the table
- Because of many reinvestment opportunities, the XYZ Company is not expected to pay any dividends for the next 3 years. Beginning 4 years from