The constant-growth dividend discount model can be used both for the valuation of companies and for the
Question:
Assume: $20 = Price of a Stock Today
8% = Expected Growth Rate of Dividends
$0:60 = Annual Dividend One Year Forward
a. Using only the preceding data, compute the expected long-term total return on the stock using the constant-growth dividend discount model.
b. Briefly discuss three disadvantages of the constant-growth dividend discount model in its application to investment analysis.
c. Identify three alternative methods to the dividend discount model for the valuation of companies.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
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