Solution-Derive the dividend discount model

Derive the dividend discount model

Reference no: EM133186102

Question - Equity valuation

(a) Derive the Dividend Discount Model (DDM).

(b) Discuss how to use this model to evaluate stocks.

(c) Suppose that a company expects to pay a £2.50 dividend in the first 2 years and then expects it to grow at 12% through the end of year 4. After year 4 dividend payment grows at the constant rate of 6% and stabilizes at 6%. What is the value of this stock?

Reference no: EM133186102

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Derive the dividend discount model

Reference no: EM133186102

Reference no: EM133186102

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