Constant growth dividend valuation model

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Reference no: EM132063331

Write out the formula for the constant growth dividend valuation model. What key assumptions are required?

You are interested in buying a share that paid its last annual dividend 9 months ago. You can assume that the next dividend payment (3 months from today) will be €1.50. The company anticipates that dividend growth rates will be 5% annually for the next two dividends and 2% thereafter. Assuming the firm’s cost of equity rE is 9%, how much should you pay for the share?

Reference no: EM132063331

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