Module 29.2 LOS 29.d: Calculate implied growth rate of dividends using the Gordon Growth Model

We can calculate the implied growth rate of dividends if we know the value of the other 3 variables in the GGM.


V0 = fundamental value

D0 = dividend just paid

D1 = dividends expected to be received at end of Year 1

r = required return on equity

g = dividend growth rate

As long as we have 3 known variables, we can back out the 4th using algebra.

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