Question: Why do stock prices change? Suppose the expected D1 is $2, the growth rate is 5%, and rs is 10%. Using the constant growth model,

Why do stock prices change? Suppose the expected D1 is $2, the growth rate is 5%, and rs is 10%. Using the constant growth model, what is the stock’s price? What is the impact on the stock price if g falls to 4% or rises to 6%? If rs increases to 9%or to 11%?

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