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    Stock valuation and stock market equilibrium

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    Please Explain in Your Own words (200 words) a detailed explanation without references please.

    There are Two investors are evaluating General Motors (GM) stock for a possible stock purchase. They agree on the expected value of D(1) and also on the expected future dividend growth rate. Also, they agree on the risk of the stock. However, one investor normally holds stocks for only 2 years while the other investor usually holds stocks for 10 years.

    On the basis of market multiple analysis, they should both be willing to pay the same price for GM's stock. Is this True or is it false?

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    Solution Summary

    The solution explains how to arrive at stock price given different holding periods.