For the valuation of the HZ stock, the following forecast is considered the most reasonable: the company
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Question:
For the valuation of the HZ stock, the following forecast is considered the most reasonable: the company will keep up the current 20% annual growth of its dividends for two more years, and then the company will stabilized to a long-run dividend growth rate of 5% for the foreseeable future. You know that the last dividend paid on the stock is $2 per share.
a.What will be your estimate of its stock value if the required return on the stock is 12%?
b.Name one major problem with, or limitation of, the Discounted Dividend Model for stock valuation.
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Authors: Alfred A. Marcus, Timothy J. Hargrave
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