If the required rate of return used in the dividend growth model is increased, then:

Question

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According to the dividend growth model, an increased required rate of return decreases the present value of future dividends and thus decreases the current value of the stock. This is because a higher required rate of return reflects a higher level of risk, making the stock less attractive to potential buyers and leading to a decrease in demand and price.

If the Required Rate of Return Used in the Dividend