Gordon Growth Model Calculator



The dividend paid at time 0 $

The cost of equity capital for the company %

The growth rate %

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) )