IBM's Stock Price Is $22, It Is Expected to Pay

question 87

Multiple Choice

IBM's stock price is $22, it is expected to pay a $2 dividend, and analysts expect the firm to grow at 10 percent per year for the next five years. TDI's stock price is $10, it is expected to pay a $1 dividend, and analysts expect the firm to grow at 12 percent per year for the next five years. What is the difference in the two firms' required rates of return?

• A) 2.91 percent
• B) 1.82 percent
• C) 2.03 percent
• D) 3.23 percent

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Risk of Loss

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