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Put some key features of gorden model regarding relevant dividend policy
put some key features of Horden model regarding relevant dividend policy
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Anonymous User
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According to the Gordon’s Model, the market value of the share is equal to the present value of future dividends. It is represented as: P = [E (1-b)] / Ke-br Where, P = price of a share E = Earnings per share b = retention ratio 1-b = proportion of earnings distributed as dividends Ke = capitalization rate Br = growth rate
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Anonymous User Best Answer
The Gordon’s Model, given by Myron Gordon, also supports the doctrine that dividends are relevant to the share prices of a firm. Here the Dividend Capitalization Model is used to study the effects of dividend policy on a stock price of the firm.
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Anonymous User![best-answer]()
Assumptions of Gordon’s Model The firm is an all-equity firm; only the retained earnings are used to finance the investments, no external source of financing is used. The rate of return (r) and cost of capital (K) are constant. The life of a firm is indefinite. Retention ratio once decided remains constant. Growth rate is constant (g = br) Cost of Capital is greater than br