The shortfalls of dividend discount model

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Reference no: EM131538417

Advanced Robotics Inc expects to pay a $2.20 dividend next year and have a 5.5% dividend growth rate. But due its risky profile, Advanced Robotics Inc has a 1.6 beta. What price would you buy the stock? Assume 3% risk free rate and 9% for the market risk premium. (7 points)

Assuming the same discount rate you found above, what should the price of the stock price be 5 years from now?

What do you think are the shortfalls of the dividend discount model? What other stock valuation methods could you use?

Reference no: EM131538417

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