Two investors are evaluating IBM’s stock for possible purchase. They agree on the expected value of D1 and on the expected future dividend growth rate. They also agree on the riskiness of the stock. One investor normally holds stocks for two years, and the other normally holds stocks for 10 years. On the basis of the type of analysis presented in this chapter, they should both be willing to pay the same price for IBM’s stock. Is this statement correct? Explain.
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