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Question 6 Bonus

1. Please show me the Gordon Growth Model formula. (Just copy it done. P,-?, 0.1 point) 2. As we mentioned, g not only govern

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Answer #1

1.
Gordon Growth Model states that
P0=D1/(r-g)

2.
P1=D2/(1+g)
P1=D1*(1+g)/(r-g)
=>P1=P0*(1+g)
=>P0=P1/(1+g)

3.
D1=P0*(r-g)
D1=P1*(r-g)/(1+g)

4.
Dt=Pt*(r-g)/(1+g)

6.
P0=(P1*(r-g)/(1+g)+P1)/(1+r)=P1/(1+g)

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