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Suppose that the expected dividends to be paid one year from now by a broad market index equals $357 million. The appropriate discount rate for
Suppose that the expected dividends to be paid one year from now by a broad market index equals $357 million. The appropriate discount rate for the market is 12.9% per annum with participants believing that dividends paid out by the market will grow by 4.2% per annum in perpetuity. Using the constant-growth formula for valuation, if the market's required return changes to 14.5%, by what percentage will the value of the market change?
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