Dividend Valuation Model

This topic has 1 reply, 2 voices, and was last updated 13 years ago by nosiku.

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April 19, 2013 at 11:30 am #122892
babarali47
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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
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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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