EBK INVESTMENTS
EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 18, Problem 6CP

A

Summary Introduction

To calculate: Dividend growth rate using Gordon growth model assuming that the firm’s current stock price of $58.49 equals intrinsic value.

Introduction: The dividend growth rate is depends on the dividend value, growth rate, return rate, and intrinsic value of the stock. It tells us about the growth of the investment.

B

Summary Introduction

To select: Appropriateness of the Gordon growth model for common stock.

Introduction : In common stock, the dividend value and earning is not increasing at same rate. Thus dividend value should be kept constant and earnings are increases.

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