By DDM, the current stock price is the PV of all its (perpetual) future dividends; How about the PV of (non-perpetual) cashflows 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 $3.3 per share. The dividend is expected to grow by 2% per year. The required rate of return is 12%. By DDM/Gordon growth model, what is the price to sell the stock in 3 years? 1+ decimals 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 you receive? 1+ decimals By Gordon growth model, what is the current stock price? How does your answer here compare to Part 2, what's your finding/insight? 1+ decimals