Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? Briefly explain your choice. Show work in excel   X Y Price $30 $30 Expected growth (constant) 6% 4% Required return 12% 10%   a. Stock Y has a higher dividend yield than Stock X. b. One year from now, Stock X's price is expected to be higher than Stock Y's price. c. Stock X has the higher expected year-end dividend. d. Stock Y has a higher capital gains yield. e. Stock X has a higher dividend yield than Stock Y.

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 8P: A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per...
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Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? Briefly explain your choice. Show work in excel

 

X

Y

Price

$30

$30

Expected growth (constant)

6%

4%

Required return

12%

10%

 

a.

Stock Y has a higher dividend yield than Stock X.

b.

One year from now, Stock X's price is expected to be higher than Stock Y's price.

c.

Stock X has the higher expected year-end dividend.

d.

Stock Y has a higher capital gains yield.

e.

Stock X has a higher dividend yield than Stock Y.

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The correct answer is b. One year from now, Stock X's price is expected to be higher than Stock Y's price

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