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Finance Dictionary and Glossary of Investment Terms
Gordon Growth Model
Definition 1.
A model for solving the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. Given a dividend per share (D) that is payable in one year, and further assuming that the dividend grows at a constant rate of (G) forever (in perpetuity), the model solves for the present value of the infinite series of future dividends.Where D = Expected dividend per share one year from nowk = required rate of return for equity investorG = growth rate in dividends (in perpetuity)
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