What conditions must hold if a stock is to be evaluated using the
constant growth model?
What does the term “expected” mean when we say expected growth
rate?
Suppose an analyst says that she values GE based on a forecasted
growth rate of 6 percent for earnings, dividends, and the stock price.
If the growth rate next year turns out to be 5 or 7 percent, would
this mean that the analyst’s forecast was faulty? Explain.
