The constant-growth version of the DDM asserts that if dividends are expected to grow at a constant rate forever, the intrinsic value of the stock is determined by the formula V0 = _____ D1 k − g This version of the DDM assumes a constant value for g. There are more sophisticated multistage versions of the model for more-complex environments. When the constant-growth assumption is reasonably satisfied and the stock is selling for its intrinsic value, the formula can be inverted to infer the market capitalization rate for the stock: P-69 k = ___ D1 P0

+ g