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Suppose Mr. Klein just bought a share of CleanAir Co., a renewable energy startup. CleanAir promises to pay Mr. Klein $20 in dividends for
Suppose Mr. Klein just bought a share of CleanAir Co., a renewable energy startup. CleanAir promises to pay Mr. Klein $20 in dividends for one year and then the firm will shut down. Suppose that the liquidation value of the share is $2, and the rate of time preference is 7%. Then, according to the single-period dividend discount model, the present value of the cash payment received by Mr. Klein in one year would be that the market price of the share of stock is, What is the main flaw of multiperiod dividend discount models? The requirement of perfect knowledge of the dividend growth rate over time. . The assumption that the dividend growth rate would never be higher than the required rate of return or rate of time preference. The assumption that dividends will remain constant forever. The requirement that the corporation's dividend payments be accurately predicted. which means
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