Each of two shares, A and B, are expected to pay a dividend of $7 in the upcoming year. The expected growth rate of dividends is 6% for both shares. You require a return of 10% on Share A and a return of 12% on Share B. Using the constant growth DDM, the intrinsic value of Share A ________.
A) will be higher than the intrinsic value of Share B
B) will be the same as the intrinsic value of Share B
C) will be less than the intrinsic value of Share B
D) more information is necessary to answer this question
Correct Answer:
Verified
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