alleryStart learning →In the Gordon growth model, the stock price equals D1 divided by
Acost of equity times growth
Bcost of equity plus growth
Ccost of equity minus growth
Dgrowth minus cost of equity
Answer & Solution
Correct answer: C. cost of equity minus growth
The model is a growing perpetuity, so next year's dividend is divided by the required return less the growth rate.
Keep practising Dividend Policies
Browse all Dividend Policies questions for CA Inter, or explore more Financial Management topics.
Related questions
Lintner's dividend model is especially relevant to which type of company?Half of a Rs 12 EPS is paid out; r is 15% and ke 10%. What does Walter's formula give?A share is priced at Rs 80 with D1 Rs 4 and ke 11%. The implied growth rate isD1 Rs 10, ke 15%: by how much does the Gordon price rise if g moves from 5% to 10%?D1 is Rs 5, ke 12% and g 7%. What is the Gordon price?In a world without taxes, MM says a levered firm's value versus an unlevered firm's isModigliani received the Nobel Prize in Economics in which year?The Modigliani-Miller theorem was first proposed in the year