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What are the limitations of the dividend discount model? A stock currently pays a dividend...

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Accounting

  • What are the limitations of the dividend discount model?
  • A stock currently pays a dividend of $4 for the year. Expected dividend growth is 20% for the next three years and then growth is expected to revert to 4% thereafter for an indefinite amount of time. The appropriate required rate of return is 10%. What is this stocks intrinsic value?
  • What is the rate of return on an investment that costs $500 and is sold after 1 year for $560?

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