Estimating constant-growth model

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Reference no: EM1370245

Constant-Growth Model.

Gentleman Gym just paid its annual dividend of $3 per share, and it is hugely expected that the dividend will raise by five percent per year indefinitely.

1. What price should the stock sell at? The discount rate is 15 percent.

2. How would your answer change if the discount rate were only 12 percent? Why does the answer change?

Reference no: EM1370245

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