Sweet Candy will pay a dividend of $0.72 next year. The CEO of the company declared that the company will maintain
a constant growth rate of 7% per year every year from now on.
a. How much will you pay for the stock if your required return is 10%?
b. How much will you pay for the stock if your required return is 8%?
c. Based on your answer in parts a and b, give one disadvantage of the constant growth model.