Dividend Growth Model: A Method of Valuation of a Company’s Share Price
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The dividend growth model is a method of valuation of a company’s share price. It assumes that the current theoretical price of a share is equal to the worth of the present value of the sum of all the future dividend payments flow from the share till perpetuity. The theory was proposed by Myron J. Gordon and also popularly known as Gordon growth model. The document explains the different sub-models of the dividend discount model based on different assumptions of growth rate and the relevant model for valuation in a given situation.