Problem:

The constant- growth dividend discount model can be used both for the valuation of com-panies and for the estimation of the long- term total return of a stock. Assume: $ 20 = Price of a Stock Today 8% = Expected Growth Rate of Dividends $ 0: 60 = Annual Dividend One Year Forward

Required:

Question 1: Using only the preceding data, compute the expected long- term total return on the stock using the constant- growth dividend discount model.

Question 2: Briefly discuss three disadvantages of the constant- growth dividend discount model in its application to investment analysis.

Question 3: Identify three alternative methods to the dividend discount model for the valuation of companies.

Note: Please provide full description.