Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 2P
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The constant growth model is a method for valuing the share price of a stock. It calculates the intrinsic value of a stock. It is also known as the Dividend Discount Model (DDM) or Gordon’s Growth Model (GGM).
It is an important tool in comparing various companies across industries while making an investment decision.
It is calculated as:
Calculate the expected dividend:
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