Gordon Growth Model Example
A company retains 30% of earning and return on equity
investment is 9%. What is dividend growth Rate of dividend?
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
=
30% x 9%
= 2.7%
