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CFA Level 1
Equity Investments

Calculating Stock Price Using Gordon Growth Model

Medium Equity Valuation Techniques Dividend Discount Models

John is analyzing a publicly traded company and is considering using the Gordon Growth Model (a type of Dividend Discount Model) to value its stock. He notes that the company has a current dividend of $2 per share, and he expects the dividends to grow at a constant rate of 5% indefinitely. If the required rate of return for the stock is 10%, what is the estimated price of the stock using the Gordon Growth Model?

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