Consider the following three stocks:,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.,c. Stock C is expected to pay a dividend of $5 next year. Thereafter, dividend growth,is expected to be 20 percent a year for 5 years (i.e., until year 6) and zero thereafter.,If the market capitalization rate for each stock is 10 percent, which stock is the most,valuable? What if the capitalization rate is 7 percent?
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