P=D/k-g
Where: P=security\'s price; D=dividend payout ratio; k=required rate of return (derived from the capital asset pricing model; g=dividends\' expected growth rate.
2. The model's assumptions are that: (i) the dividend growth rate is constant; the growth rate cannot equal or exceed the required rate of return; the investor's required rate of return is both known and constant.
3. The implications of market efficiency on the dividend growth model is that, in practice, a company's earnings and growth rates are not known and not constant.
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