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MathGroup Archive 2004

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Re: How To Prove The Validity Of Dividend Discount H Model

  • To: mathgroup at smc.vnet.net
  • Subject: [mg50772] Re: How To Prove The Validity Of Dividend Discount H Model
  • From: cskoh001 at yahoo.com.sg (kcs)
  • Date: Sun, 19 Sep 2004 21:39:34 -0400 (EDT)
  • References: <9ouhfg$19q$1@smc.vnet.net>
  • Sender: owner-wri-mathgroup at wolfram.com

Hmm....this reply comes 3 years late. But i believe you can find your
solution here. Please refer to 

Fuller and Hsia [`A Simplified Common Stock Valuation Model? Financial
Analysts? Journal Sept-Oct 1984 p49-56]

On Thu, 27 Sep 2001 06:37:36 +0000 (UTC), @Paul wrote:
>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


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