Valuation
Gordon Growth Model
Definition
What is Gordon Growth Model?
A constant-growth dividendA payment made from a company's profits to eligible shareholders. model dividing next-period dividend by required returnThe minimum expected return an investor demands for the time and risk involved. minus growth.
Example in practice
How This Looks in Practice
A stable company with long-run dividend growth is valued using the Gordon model.
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Related Terms
Valuation
Market Value
The price at which an asset could trade in the market at a given time.
ValuationIntrinsic Value
An estimate of an asset's underlying economic worth based on expected cash flows, assets, or earning power.
ValuationFair Value
An estimate of an asset's appropriate value under specified assumptions or accounting standards.
Capital BudgetingNet Present Value
Present value of expected cash inflows minus present value of expected cash outflows.