Assume That The Constant-Growth Ddm Is The Appropriate Valuation

Assume that the Constant-Growth DDM is the appropriate valuation for a stock index. Assume further that the long-term annual market return is expected to be 10%, the long-term expected growth rate in dividends is expected to be 4. 5% and the Dow Jones Industrial Average is fairly valued at 18,000. If investors change their expectation for the long-term growth rate in dividends from 4. 5% to 3. 5%, what would be the expected change in the value of the Dow Jones Industrial Average?

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