Gordon Growth Model Calculator

✖Dividend Per Share is a financial metric that represents the amount of cash a company is willing to distribute to its shareholders in the form of dividends.ⓘ Dividend Per Share [D]			+10% -10%
✖Required Rate of Return is the minimum return an investor expects for taking on the risk of investing in a particular asset, such as stocks or bonds.ⓘ Required Rate of Return [RR]			+10% -10%
✖Constant Growth Rate of Dividend refers to the assumption that dividends paid by a company will grow at a stable, constant rate indefinitely.ⓘ Constant Growth Rate of Dividend [g]			+10% -10%

✖Current Stock Price is the present purchase price of security.ⓘ Gordon Growth Model [P_c]

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Formula

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Gordon Growth Model

Formula

`"P"_{"c"} = ("D")/("RR"-"g")`

Example

`"440"=("22")/("0.08"-"0.03")`

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Gordon Growth Model Solution

STEP 0: Pre-Calculation Summary

Formula Used

Current Stock Price = (Dividend Per Share)/(Required Rate of Return-Constant Growth Rate of Dividend)
P_c = (D)/(RR-g)
This formula uses 4 Variables

Variables Used

Current Stock Price - Current Stock Price is the present purchase price of security.
Dividend Per Share - Dividend Per Share is a financial metric that represents the amount of cash a company is willing to distribute to its shareholders in the form of dividends.
Required Rate of Return - Required Rate of Return is the minimum return an investor expects for taking on the risk of investing in a particular asset, such as stocks or bonds.
Constant Growth Rate of Dividend - Constant Growth Rate of Dividend refers to the assumption that dividends paid by a company will grow at a stable, constant rate indefinitely.

STEP 1: Convert Input(s) to Base Unit

Dividend Per Share: 22 --> No Conversion Required
Required Rate of Return: 0.08 --> No Conversion Required
Constant Growth Rate of Dividend: 0.03 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

P_c = (D)/(RR-g) --> (22)/(0.08-0.03)

Evaluating ... ...

P_c = 440

STEP 3: Convert Result to Output's Unit

440 --> No Conversion Required

FINAL ANSWER

440 <-- Current Stock Price

(Calculation completed in 00.004 seconds)

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Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

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< 14 Forex Management Calculators

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Go Cumulative Distribution 1 = (ln(Current Stock Price/Option Strike Price)+(Risk Free Rate+Volatile Underlying Stock^2/2)*Time to Expiration of Stock)/(Volatile Underlying Stock*sqrt(Time to Expiration of Stock))

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Interest Rate Parity

Go Forward Rate Constant = Spot Exchange Rate*((1+Interest Rate of Quote Currency)/(1+Interest Rate of Base Currency))

Gordon Growth Model

Go Current Stock Price = (Dividend Per Share)/(Required Rate of Return-Constant Growth Rate of Dividend)

Payoff for Call Buyer

Go Payoff for Call Buyer = max(0,Price of Underlying at Expiration-Exercise Price)

Purchasing Power Parity Theory using Inflation

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Intrinsic Value

Go Intrinsic Value = Share Price-Base Value

Gordon Growth Model Formula

Current Stock Price = (Dividend Per Share)/(Required Rate of Return-Constant Growth Rate of Dividend)
P_c = (D)/(RR-g)

What is Gordon Growth Model?

The Gordon Growth Model, also known as the Gordon-Shapiro Model or the Dividend Discount Model (DDM), is a method used to value a stock by assuming that dividends will grow at a constant rate indefinitely.

P0 is the current stock price.
D0 is the most recent dividend per share.
r is the required rate of return (or discount rate).
g is the constant growth rate of dividends.

How to Calculate Gordon Growth Model?

Gordon Growth Model calculator uses Current Stock Price = (Dividend Per Share)/(Required Rate of Return-Constant Growth Rate of Dividend) to calculate the Current Stock Price, The Gordon Growth Model formula is defined as a method used to value a stock by assuming that dividends will grow at a constant rate indefinitely. Current Stock Price is denoted by P_c symbol.

How to calculate Gordon Growth Model using this online calculator? To use this online calculator for Gordon Growth Model, enter Dividend Per Share (D), Required Rate of Return (RR) & Constant Growth Rate of Dividend (g) and hit the calculate button. Here is how the Gordon Growth Model calculation can be explained with given input values -> 440 = (22)/(0.08-0.03).

FAQ

What is Gordon Growth Model?

The Gordon Growth Model formula is defined as a method used to value a stock by assuming that dividends will grow at a constant rate indefinitely and is represented as P_c = (D)/(RR-g) or Current Stock Price = (Dividend Per Share)/(Required Rate of Return-Constant Growth Rate of Dividend). Dividend Per Share is a financial metric that represents the amount of cash a company is willing to distribute to its shareholders in the form of dividends, Required Rate of Return is the minimum return an investor expects for taking on the risk of investing in a particular asset, such as stocks or bonds & Constant Growth Rate of Dividend refers to the assumption that dividends paid by a company will grow at a stable, constant rate indefinitely.

How to calculate Gordon Growth Model?

The Gordon Growth Model formula is defined as a method used to value a stock by assuming that dividends will grow at a constant rate indefinitely is calculated using Current Stock Price = (Dividend Per Share)/(Required Rate of Return-Constant Growth Rate of Dividend). To calculate Gordon Growth Model, you need Dividend Per Share (D), Required Rate of Return (RR) & Constant Growth Rate of Dividend (g). With our tool, you need to enter the respective value for Dividend Per Share, Required Rate of Return & Constant Growth Rate of Dividend and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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