Discuss three disadvantages of the constant-growth

Reference no: EM13265485

The constant-growth dividend discount model can be used both for the valuation of companies and for the estimation of the long-term total return of a stock.

Assume: $20 = Price of a Stock Today
8% = Expected Growth Rate of Dividends
$0:60 = Annual Dividend One Year Forward

a. Using only the preceding data, compute the expected long-term total return on the stock using the constant-growth dividend discount model.

b. Briefly discuss three disadvantages of the constant-growth dividend discount model in its application to investment analysis.

c. Identify three alternative methods to the dividend discount model for the valuation of companies.

Reference no: EM13265485

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