Chapter 8, Problem 38QP

Summary Introduction

To determine: The first stage of growth rate (${\text{g}}_1$) is exactly equal to the discount rate (R) and also indicate the expression of the stock per share when both the factors are exactly equal.

Introduction:

Two-stage dividend growth model is used to determine the value of stock. This model is used to express on the two stages of growth. The first stage of growth will have a high growth rate and second stage has a constant growth rate.