By DDM, the current stock price is the PV of all its (perpetual) future dividends; How about the PV of (non-perpetual) cashflows D1,D2,D3+P3 if you hold the stock for only three years and sell it at the end of year 3 . This exercise will compare these two methods of discounting. Do you think they will compute different current stock prices? IBM just paid an annual dividend of $2.5 per share. The dividend is expected to grow by 5% per year. The required rate of return is 12%. Part 1 Attempt 1/10 for 10 pts By DDM/Gordon growth model, what is the price to sell the stock in 3 years? Part 2 Attempt 1/10 for 10 pts If you buy the stock today, hold it, sell it in 3 years at the price computed in Part 1 , what is the present value of all cashflows (D1,D2,D3,P3) you receive? Part 3 Attempt 1/10 for 10 pts By Gordon growth model, what is the current stock price? How does your answer here compare to Part 2, what's your finding/insight