How To Prove The Validity Of Dividend Discount H Model
- To: mathgroup at smc.vnet.net
- Subject: [mg30935] How To Prove The Validity Of Dividend Discount H Model
- From: "@Paul" <pink1julie at hotmail.com>
- Date: Thu, 27 Sep 2001 02:16:56 -0400 (EDT)
- Organization: Singapore Telecommunications Ltd
- Sender: owner-wri-mathgroup at wolfram.com
Hi,
I am studying for the financial analysis course. I have no problems with the
Gordon Growth Model & The Two- Stage Dividend Discount Model.
But, I have difficulty proving the equation form of the H model:
Value per share = DPS0(1 + g2) / (r - g2)
+ DPS0 * H (g1 - g2) / (r - g2)
This model assumes that the initial high growth rate (g1) will decline
linearly to the stable growth rate (g2). The high growth period is assumed
to last for 2H years. Thereafter, the dividends grow at a constant rate g2
forever. DPS0 is the dividend at time 0.
Any help from anyone is much appreciated. Thanks.
Julie