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    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 Preview

    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 ...

    Solution Summary

    The solution explains the reason why all investors should have the same price as the present value of all future dividends