The constant-growth-rate discounted dividend model

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Reference no: EM13919775

The Constant-Growth-Rate Discounted Dividend Model, , says that: P0 = D1 / (k – g)

A. rearrange the terms to solve for:

i. g; and

ii. D1.

As an example, to solve for k, we would do the following:

1. Multiply both sides by (k – g) to get: P0 (k – g) = D1

2. Divide both sides by P0 by to get: (k – g) = D1 / P0

3. Add g to both sides: k = D1 / P0 + g

Reference no: EM13919775

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