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Dividend growth model value (using historic dividend growth rate)
Historic dividend growth rate = [(6·0m/5·0m)1/3 – 1] x 100 = 6·27%
An assumption is made that future dividend growth is similar to historic dividend growth.
Value of GWW Co = (6m x 1·0627)/(0·09 – 0·0627) = $234 millionsir the ( D1 /pa) + g dividend, in some cases, ke use d1(1+g)/pa +g
in other is d1/pa
im confused, should i used the latest dividend with (!+g) or just the dividend alone in the numerator ?
thanksThe formula has as the numerator Do(1+g).
This is the same as the dividend in 1 years time (D1) because the dividend in 1 years time will be the current dividend multiplied by 1+g.
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