Gordon Dividend Growth Model Example
ABC Company director decide to retain 60% of earning.
The cost of equity is 15% in the market. Calculate the Gordon Dividend Growth
for ABC Co.
Solution
Gordon
Dividend Growth formula = Retained Earning x Return, this formula can be
expressed
G=Br
Where,
G=
Dividend Growth Rate
B=
Retained earning
r=
Rate of return on equity
By
putting value in above formula, we can solve the above Example
=
60% x 15%
= 9%
