A firm pays a current dividend of $1.00 which is expected to grow at a rate of 5% indefinitely. If current value of the firm’s shares is $35.00, what is the required return applicable to the investment based on the Gordon dividend discount model (DDM)?
The Gordon DDM uses the dividend for the period (t + 1) which would be $1.05.
$35 = $1.05 / (required return – 0.05)
Required return = 0.08 or 8.00%
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发表于 2010-4-19 11:20
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