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If an analyst uses the constant dividend growth model to value a stock, which of

ID: 2760669 • Letter: I

Question

If an analyst uses the constant dividend growth model to value a stock, which of the following is certain to cause the analyst to increase her estimate of the current value of the stock (assuming, of course, that all other factors are held constant)? If an analyst uses the constant dividend growth model to value a stock, which of the following is certain to cause the analyst to increase her estimate of the current value of the stock (assuming, of course, that all other factors are held constant)?

Explanation / Answer

correct option is :"Decreasing the required return on stock

When the cost of equity reduce with all factors remaining the same ,the price will increase (this is so because we divide same numberator with lower denominator)

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