Suppose Ginny just bought stock in AirPower Co., a renewable energy startup, and that Ginny estimates there will be a dividend of $7 per share, paid annually, forever. If the discount rate on the stock is 7 percent, then using the discount dividend model, the value of the stock is:

$92.00 per share

$100.00 per share

$104.00 per share

$109.00 per share

Now suppose Ginny estimates that there will be a dividend of $7 per share paid out next year, and that the dividend is expected to grow at a constant rate of 3 percent per year. If the required rate of return on the stock is 7 percent, then using the discount dividend model, the value of the stock is:

$164.50 per share

$175.00 per share

$180.25 per share

$185.50 per share

Which of the following are limitations to the dividend discount model? Check all that apply.

It can result in inaccurate valuations when the dividend growth rate is incorrectly estimated.

It can result in inaccurate valuations when the required rate of return by investors is incorrectly estimated.

It assumes that the dividend growth rate will never be lower than the required rate of return.

It assumes that uncertainty cannot be accounted for because it doesnt allow expectations about investors required rate of return to change.