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Explain the Gordon growth model of stock pricing. Explain how changes in each component affect the current stock price. On what assumptions is the model based?
Discount Rate
The interest rate used to discount future cash flows to their present value, reflecting the time value of money and risk.
Initial Investment
The initial outlay of money required to start a project, purchase an asset, or invest in a business venture.
Useful Life
The estimated period over which an asset is expected to be usable for the purpose it was acquired.
Salvage Value
The anticipated remaining value of an asset at the conclusion of its operational life.
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