Some of the drawbacks using dividend growth model

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Reference no: EM131020917

1. Calculate Assets J’s theoretical value of the common stock price. The equation for the Dividend Growth Model is: V = (Current Dividend * (1 + Dividend Growth)) (Required Return – Dividend Growth) where:

V = price of the common stock,

Current Dividend = 8

Required return on common stock = .015

Dividend Growth = .09

2. What are some of the drawbacks using Dividend Growth Model, or any other dividend based pricing model? Explain in detail

3. Company A has a P/E (price/earnings) ratio of 14 and earnings of $5/share. Calculate the price of the stock.

4. Would you ever buy a stock will a low Price/Earnings ratio? Why or why not?

Reference no: EM131020917

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