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What does the Gordon growth model calculate?

  1. A The value of a stock as next year's dividend divided by the required return less the growth rate
  2. B The cost of debt
  3. C The bond's yield
  4. D The market risk premium
Answer

The value of a stock as next year's dividend divided by the required return less the growth rate

It requires the growth rate to be below the required return and assumes constant perpetual growth, which limits its applicability.

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