Question
Two investors are evaluating Honewells common stock for possible purchase. They agree on the expected value of D1 and also on the expected future dividend
Two investors are evaluating Honewells common stock for possible purchase. They agree on the expected value of D1 and also on the expected future dividend growth rate. Further, they agree on the riskiness of the stock, and thus, the discount rate. Assume that the first investor would plan to sell the stock after 3 years and the 2nd investor would plan on selling the stock after 5 years. Would they agree on the price of the stock today, or would they disagree on the price because of the differences in the length of time that each plans to hold the stock? Clearly explain.
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