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I thought this would be a fun question to poll the users of this sub. If this format gets any traction, maybe I'll try to post a weekly question or something.
# Question 1
Consider two companies (A & B). Both companies had operating income / cash flow of $10 million last year.
* **Company A**: Experiences no earnings growth and will pay out all cash flows as dividends.
* **Company B**: Reinvests all operating income and grows earnings 10% per year for ten years. Then chooses to pay all cash flows as dividends.
Both companies carry a cost of equity (or discount rate) of 10%. Ignore taxes and etc.
Which company would you rather invest in?