Using the dividend valuation method, an analyst determines the value of Company A’s stock to be $10 and the value of Company B’s stock to be $14.

Using the dividend valuation method, an analyst determines the value of Company A’s stock to be $10 and the value of Company B’s stock to be $14. Based on this information, which of the following statements is most accurate? 

A. Company B must be riskier than Company A, and risk requires a reward. 

B. Other things being equal, if Company A and Company B have the same firm value, Company B must have more debt, thus leveraging its returns for the benefit of shareholders.

C. Other things being equal, if Company A and Company B have the same firm value, Company A may have more shares of stock outstanding than Company B. 

D. Company B’s required rate of return is higher than Company A’s required return.

Which is the correct answer?