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Describe the dividend discount model

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Assume that you are using the dividend discount model (the Gordon Growth Model) to value stock. The stock currently pays no dividends, but expected to begin paying dividends in five years. Compute the value of a stock paying no dividends today, but that is expected to pay a constant annual dividend of $4 starting in year 5. The firm's cost of equity is 11%. How would you value that stock?

Reference no: EM133120094

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