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The Dividend Discount Model

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › The Dividend Discount Model

  • This topic has 2 replies, 2 voices, and was last updated 11 years ago by AvatarJohn Moffat.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • November 18, 2014 at 9:31 am #210904
    Avatarolka
    Member
    • Topics: 2
    • Replies: 9
    • ☆

    Hi, Can, you help me wiht the dividend discount model when dividends are not paid next your but will be paid in 3 years and have constant growth after that, for example. Like here :
    GXG Co could suspend dividends for two years, and then pay dividends of 25 cents per share from the end of the
    third year, increasing dividends annually by 4% per year in subsequent years. Dividends in recent years have grown
    by 3% per year
    Thank you

    November 18, 2014 at 10:08 am #210920
    Avatarolka
    Member
    • Topics: 2
    • Replies: 9
    • ☆

    I ment, how to calculate market value of shares based on valuation on future dividends

    November 18, 2014 at 11:14 am #210965
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54836
    • ☆☆☆☆☆

    You use the dividend growth model, but because the dividends don’t start for 3 years (instead of in 1 year) you need to discount for the extra 2 years.

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