11. Cost of Capital and Capital Structures Flashcards
1
Q
What is the formula for the Dividend Valuation Model
A
P=D0(1+g) / (Ke-g)
Where
P = current share price D0 = Current level of dividend g = estimated growth rate in dividends
If we need to derive Ke:
Ke = (D0(1+g) / Po) + g
D0 (1+g is the dividend at the end of the year (D1)
