Gordon Growth Model Calculator

Gordon Growth Model Calculator



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Gordon Growth Model Calculator helps calculating the stock value, based on Gordon Growth Model



What is Gordon Growth Model?

Gordon Growth Model was developed by Myron Jules Gordon

The model is used for valuing the value of a firm or a stock

Gordon Growth Model is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value. In other words, it is used to value stocks based on the net present value of the future dividends



The Formula of Gordon Growth Model

The value equals to:

CF1/(r-g)

Where: CF1 = The Cash Flow at the end of the year

CF1 = CF1 x (1+g)

r = cost of equity capital for the company

g = growth rate



Example of Gordon Growth Model

If CF1 = 108

r = 8%

g = 3%

The value, according to Gordon Growth Model is 2,060 ( 100 x 1.08 / (0.08-0.03) )



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