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Constant-growth formula for valuation

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Reference no: EM131041333

Suppose that in 2015 the expected dividends of the stocks in a broad market index equaled $210 million when the discount rate was 7% and the expected growth rate of the dividends equaled 5%. Using the constant-growth formula for valuation, if interest rates increase to 9%, the value of the market will change by _____.

  • -10%
  • 24%
  • -25%
  • -33%

Reference no: EM131041333

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