Dividend Valuation Method

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February 14, 2019 at 12:26 pm #505108
goswamigora82
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Dear Sir, I am having trouble in understanding Dividend Valuation method related to the query below. Appreciate if you can help be sort out the logic.

When we value company using dividend valuation method or value of shares, some time the formula used is D1(1+g) / (Ke-g) and some time D1/(Ke-g)

This create some difference in the answer i get and the answer mentioned in the book.
February 17, 2019 at 11:00 am #505489
P2-D2
Keymaster
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Hi,

It isn’t D1(1+g), you should be using Do(1+g) as this is then the same as D1, the dividend in one year’s time.

Thanks
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