DDM

CFA Level I Equities
#1

Hello everyone! I would like to understand why when they ask you to value the stock using DDM two years from now, the response uses 3 periods. It s pretty confusing, here it goes

a firm has constant growth of 7%, just paid a divident of 6.25. If r is 12% what will the stock sell for 2 years from now. How do i know this requieres a 3 period ?

thank you in advance !

The owl

#2

Are the dividends paid semi-annualy?

#3

The Gordon growth model is generally written as:

P0 = D1 / (r − g)

More generally:

P_i_ = D(i+1) / (r − g)

Therefore:

P2 = D3 / (r − g)