Question: Constant Dividend Growth Model Assume a stock has dividends that grow at a constant rate forever. If you value the stock using the constant dividend

Constant Dividend Growth Model Assume a stock has dividends that grow at a constant rate forever. If you value the stock using the constant dividend growth model, how many years worth of dividends constitute one-half of the stock’s current prices?

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Even though the question concerns a stock with a constant growth rate we need to begin with the equation for twostage growth given in the chapter which is We can expand the equation see Problem 26 for more detail to the following Since the growth rate is constant g ... View full answer

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