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    Constant growth dividend valuation model

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    You use constant growth dividend valuation model (i.e. Gordon model) to find the current market price of a stock. The required rate of return for this stock increases from 15 to 17 percent combined with an increase in the growth rate from 7 to 9 percent. Given these changes, show whether the price of the stock will rise or fall and by what percent?

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    Solution Preview

    You use constant growth dividend valuation model (i.e. Gordon model) to find the current market price of a stock. The required rate of return for this stock increases from 15 to 17 percent combined with an increase
    in the growth rate from 7 to 9 percent. Given these ...

    Solution Summary

    Response provides the steps to compute the price by using the constant growth dividend valuation model

    $2.19

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