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CFA Level 1
Equity Investments

Valuation of Common Shares for Dividend and Non-Dividend Paying Companies

Medium Equity Markets And Instruments Common Shares

John is evaluating two companies that issue common shares, Company A and Company B. Company A has been distributing dividends regularly, with an annual growth rate of 5% in its dividends. On the other hand, Company B has opted not to pay dividends but reinvests all its earnings into the business for future growth. Considering these two companies, which statement is most accurate regarding the valuation of their common shares?

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