Business, 22.04.2021 18:40 robsantana11

Investor A and investor B both have required rates of return of 12%. They are considering the purchase of XTRA stock, which each views as a constant growth case. Both have estimated the dividend for the next period at $1.00, and both agree that the expected growth rate in dividends will be 6% a year. However, investor A plans to buy the stock and hold it for 10 years, while investor B plans to buy the stock and hold it for ONLY 1 year. Which of the following statements is CORRECT about stock valuation? 1. Investor A should be willing to pay more for this stock than B.
2. Investor B should be willing to pay more for this stock than A.
3. Both investors should be willing to pay the same price for the stock.
4. None of these.

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