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V = D0 (1 + g) / k - g

What does this formula mean?
The dividend-growth valuation model.

Valuation as the present value of dividends and the growth of dividends.

The stock's value is equal to the present dividend times the sum of 1 and the rate of the dividend growth divided by the required rate of return minus the rate of growth in the dividend.
V = D0 (1 + g) / k - g

What is "V"?
The stock's value.
V = D0 (1 + g) / k - g

What is "DO"?
Dividends at the present time.
V = D0 (1 + g) / k - g

What is "g"?
The rate of growth in the dividend.
V = D0 (1 + g) / k - g

What is "k"?
The required rate of return.
Dividend-Growth Valuation Model
(Stocks)

<def>
A valuation model that deals with dividends and their growth properly discounted back to the present.
Notes: Value investing primarily focuses on what an asset is worth -- its intrinsic value. As with the valuation of any asset, the valuation of stock involves bringing future cash inflows (e.g., dividends) back to the present at the appropriate discount factor.
Notes: For the individual investor, that discount factor is the required rate of return, which is the return the investor demands to justify purchasing the stock.
Dividends

<definition>
Bringing future cash inflows back to the present at the appropriate discount factor.
Discount factor

<definition>
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