Shares

Question 1

Gordon Growth Model - share price valuations

= share P = dvd
——
r - g

r = expected returns 
g = expected growth

Dvd = D (1+g)
————
r - g

Answer 1

E.g:

Current share p = 200p
Dvd = 10p

Dvd yield = 10/200 = 5% ….. r … yield expected every year

Expected growth is say 3% …. g

=> … 10x (1+3)
————-
5% - 3%

=> 10p x 1.03/2% …. 10.3/0.02 = 515p

Which means the share price of 200p is massively underpriced …. BUY!