Which of investors be willing to pay more for stock and why

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Problem a. Evaluate the following statement: One of the assumptions of the constant growth model is that the required rate of return must be greater than the expected dividend growth rate. Because of this assumption, the constant growth model is of limited use in the real world.

Problem b. Two investors are evaluating the stock of Beverly Enterprises for possible purchase. They agree on the stock's risk and on expectations about future dividends. However, one investor plans to hold the stock for five years, while the other plans to hold the stock for 20 years. Which of the two investors would be willing to pay more for the stock? Explain your answer.

Reference no: EM132960656

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