EXERCICE 2 (6 marks) The expected dividend paid by l’Oreal will be 1.45€ per stock next year. Financial analysts and experts also predict a dividend growth rate of 4% per year. The rate of (stock)...

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EXERCICE 2 (6 marks) The expected dividend paid by l’Oreal will be 1.45€ per stock next year. Financial analysts and experts also predict a dividend growth rate of 4% per year. The rate of (stock) return required by investors is 8%. Question 1. (​2 marks​) Explain the usefulness and the limitations of the Dividend Discount Model (DDM) and name a simple model often used by practitioners to value stocks ? Question 2​. (​2 marks​) Verify that the (theoretical) price of the L’Oreal stock shall be 36.25€ if we assume that dividends are perpetuities? Question 3​.​ ​(​2 marks​) What is the expected dividend growth rate if informed investors assess the l’Oreal stock at a price of 29€ per stock ? Conclude.