Gordon's Model formula for share price is:
AP = D / Ke
BP = E / Ke
CP = E(1 − b) / (Ke − br)
DP = D + g
Answer & Solution
Correct answer: C. P = E(1 − b) / (Ke − br)
1. Gordon's Model: P = E(1 − b) / (Ke − br).
2. E = earnings; b = retention ratio; r = ROI; Ke − br = discount rate − growth.
3. Growth-firm bias: optimal b depends on r vs Ke.
_Source: ICAI BoS CA Inter Paper 6A, Ch 8 "Dividend Decisions", §1 — Gordon's Model_