Gordon Growth Model Formula
R cost of equity or the required rate of return.
Gordon growth model formula. Div 1 estimated dividends for the next period. P d 1 r g where. Three variables are included in the gordon growth model formula.
Lets have a look at the formula first. R required rate of return. G expected growth rate of dividends assumed to be constant the current dividend payout d 0 can be found in the annual report of a company.
The gordon growth model formula that with the constant growth rate in future dividends is as per below. P current stock price g constant growth rate expected for dividends in perpetuity r constant cost of equity capital for the company or rate of return d 1. The wacc formula is ev x re dv x rd x 1 t.
1 d1 or the expected annual dividend per share for the following year 2 k or the required rate of return wacc wacc is a firms weighted average cost of capital and represents its blended cost of capital including equity and debt. G growth rate. What is the gordon growth model formula.