Dividend Discount Model
The dividend discount model is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present values.
The stock value equals the initial dividend amount divided by the difference between the discount rate and the dividend growth rate.
Formula
symbol | description | physical quantity |
---|---|---|
value | stock value | "Money" |
div | initial dividend amount | "Money" |
d | discount rate | "Unitless" |
g | dividend growth rate | "Unitless" |
Forms
Examples
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