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Assume that the risk-free rate of return (Krf) is 3% and the required rate of return on the market (Km) is 8%. A given stock,
- Assume that the risk-free rate of return (Krf) is 3% and the required rate of return on the market (Km) is 8%. A given stock, say, Caterpillar (CAT) has a beta coefficient of 1.03. If the dividend per share during the coming year, meaning D1, is $4.12 and g = 3.50%, what is the current intrinsic value of the stock?
- Exactly how much was D0?
- How long will it take for the dividend to double, given the growth rate, approximately?
- Which of the most fundamental assumptions about the Gordon Model/ Constant Growth Dividend Model broke down in the crash of 2008; give an example of a firm that was affected?
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