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Dividend Valuation Model

Forums › ACCA Forums › ACCA FM Financial Management Forums › Dividend Valuation Model

  • This topic has 1 reply, 2 voices, and was last updated 12 years ago by nosiku.
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  • April 19, 2013 at 11:30 am #122892
    babarali47
    Member
    • Topics: 16
    • Replies: 23
    • ☆

    Assalamwalaikum… In the dividend valuation model formula i.e. Po=Do(1+g)/Ke-g … why do we deduct growth rate from required return?. I would like to hear a detailed logical answer. Thankyou

    April 22, 2013 at 10:30 am #123223
    nosiku
    Participant
    • Topics: 5
    • Replies: 14
    • ☆

    Dividend valaution model assumes on future dividends to be paid. Becuase we do not know what growth will be faced in the future, for the current value we need to incoporate the groth by including the rate given.

    Companies normally grow becuase they are on going concern basis.

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