Question: Price is a function of the current dividend, , and the risk-free rate, and the company-specific risk premium risk discount risk-free rate . For Craft,

Price is a function of the current dividend, , and the risk-free rate, and the company-specific risk premium risk discount risk-free rate . For Craft, the lowering of the dividend growth rate increased reduced future cash flows resulting in an increase a reduction in share price. The decrease in the risk premium reflected an increase a reduction in risk leading to an increase a reduction in share price.

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