# XYZ company has just paid a dividend of \$1.15. The required rate of return on the stock is 13.4%, and investors expect the dividend to grow at a constant 8% in the future.Calculate the current stock value using the Gordon Constant growth model. [Note: you are supposed to show every step of your calculation and interpret the result.] Evaluate Gordons growth model and explain its limitations and why in certain situations the growth model used in part (a) will create incorrect results? [Note: remember to use Harvard referencing to reference your sources]

Question
8 views

XYZ company has just paid a dividend of \$1.15. The required rate of return on the stock is 13.4%, and investors expect the dividend to grow at a constant 8% in the future.

1. Calculate the current stock value using the Gordon Constant growth model. [Note: you are supposed to show every step of your calculation and interpret the result.]
2. Evaluate Gordons growth model and explain its limitations and why in certain situations the growth model used in part (a) will create incorrect results? [Note: remember to use Harvard referencing to reference your sources]
check_circle

Step 1

Hi There, Thanks for posting the question. But as per Q&A honor code, I should answer only first question when multiple questions posted under ...

### Want to see the full answer?

See Solution

#### Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in 