Gordon Growth Model

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Equation / Last modified by KurtHeckman on 2017/11/24 14:58
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cjlynch.Gordon Growth Model

The Gordon Growth Model calculator computes the present value of a stock based on the dividend per share in year one (D1), the required growth rate (k), and the growth rates in dividends (g).

INSTRUCTIONS: Choose the preferred units and enter the following:

  • (D1) This is the dividend per share in year one.
  • (k) This is the investors required annual rate of return.
  • (g) This is the perpetual annual growth rate in dividends.

Gordon Growth Model (VoS): The calculator returns the present value of the stock in U.S. dollars.  However, this can be automatically converted to other currencies via the pull-down menu.

The Math / Science

The Gordon growth model is used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate. Given a dividend per share that is payable in one year, and the assumption the dividend grows at a constant rate in perpetuity, the model solves for the present value of the infinite series of future dividends.

Source: Gordon Growth Model Definition | Investopedia http://www.investopedia.com/terms/g/gordongrowthmodel.asp#ixzz4AWojyp37