Asked by Michael Kumlien on Jun 23, 2024
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Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can only calculate the price into the future.
Discount Rate
In discounted cash flow analysis, this interest rate is crucial for determining the present value of cash flows that are expected in the future.
Dividend Growth Rate
The annualized percentage rate of growth of a company's dividend payments, indicating the steady increase of dividends over time.
Constant Rate
A fixed percentage or value that does not change over time in a given context.
- Gain insight into the primary elements of the dividend growth model and how it aids in the estimation of stock prices.
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Learning Objectives
- Gain insight into the primary elements of the dividend growth model and how it aids in the estimation of stock prices.
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