The Dividend Discount Model: Investors
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Question: . How can we say that a price equals the present value of all future dividends when many actual investors may be seeking capital gains and planning to hold their shares for only a year or two? Explain.
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Solution Summary
The solution explains the reason why all investors should have the same price as the present value of all future dividends
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Whether the investors are seeking to hold for all times or for a year or two makes no difference. The price that any investor would be willing to pay for a financial asset would be the sum of the discounted cash flows received from the asset. If you buy an asset for $100, this should represent the sum of the discounted cash flow from ...
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