We considered a model of stock price determination that leads

| November 24, 2016

We considered a model of stock price determination that leads to the conclusion that the price of a stock in the current time period is equal to the present value of the stream of future dividends. The model is based on the following assumption : s (t) = [d(t+1)+s(t+1)] / 1+r

Explain in words what the above assumption says and explain the economic reasoning that is used to justify the assumption.

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