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  1. business
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  3. the common stock of golf resorts has recently paid

The common stock of Golf Resorts has recently paid shareholders a $0.45 dividend per share...

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Accounting

The common stock of Golf Resorts has recently paid shareholders a $0.45 dividend per share and is currently trading at $17.36 each. Investors anticipate earnings and dividends of the company to grow at a constant rate of 5% per annum for the foreseeable future.

Required:

  1. According to the dividend discount model, what is the implied required rate of return for Golf Resorts shareholders?
  2. If investors now expect the $0.45 current dividend will grow at an annual rate of 8% per year for the following 2 years, then 5% in the subsequent year, and then 2% per year thereafter, what is the maximum price investors would be willing to pay for this stock today? Assume investors require a 9% rate of return.
  3. Explain in detail two limitations of the dividend discount model.

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