Answers to Text Discussion Questions

Assume D1 = $1.60, Ke = 13 percent, g = 8 percent. Using Formula 7–5, for the constant growth dividend valuation model, compute P0. 7-5. Constant growth dividend model. 6. Using the data from problem 5: a. If D1 and Ke remain the same, but g goes up to 9 percent, what will the new stock price be? Briefly explain the reason for the change. b. ................
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