4 The constant-growth dividend discount model is P0 = D1 /(k g), where P0 is the...

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4 The constant-growth dividend discount model is P0 = D1 /(k − g), where P0 is the stock’s current price, D1 is the expected dividend, k is the investor’s required rate of return and g is the growth rate of dividends. One can express the model in terms of k as follows: k = E(r) = D1/P + g.

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