Question
There are assumptions included in the Gordon growth model. For instance, according to one source, these assumptions include that the company (and therefore each dividend)
There are assumptions included in the Gordon growth model. For instance, according to one source, these assumptions include that the company (and therefore each dividend) grows at a constant rate, the company in question has stable financial leverage or there is no financial leverage involved in the company, the life of the firm is indefinite, and the required rate of return remains constant (WallStreetMojo, 2020). It would seem that, while the Gordon growth model is a decent model for valuing common stock, users should keep in mind that reality is still flexible; shares value can still change in unforeseeable ways.
Taking limitation and assumptions into account and extrapolate that they may cause hesitation. That is quite correct.However I am curious about the other side. Can you think of ways that a buyer/seller might be convinced toward making a buy/sell decision as a result of the Gordon growth model?
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