Stock Valuation Models: Variable-Growth Model
Stock Valuation Models: Variable-Growth Model
Stock Valuation Models: Variable-Growth Model
Variable-Growth Model
The non-constant dividend growth or variablegrowth model assumes that the stock will pay dividends
that grow at one rate during one period, and at another
rate in another year or thereafter.
We will use a four-step procedure to estimate the value
of a share of stock assuming that a single shift in growth
rates occurs at the end of year N.
We will use g1 to represent the initial growth rate and g2
to represent the growth rate after the shift.
7-1
7-2
7-3
7-4
7-5
7-6
7-7
7-8
7-9
7-10
7-11
7-12
7-13
7-14
7-15
7-16
7-17
7-18
7-19
7-20