Describes the gordons dividend model, Financial Management

Assignment Help:

Q. Describes the Gordons dividend model?

Gordon's Model: - Gordon's model is one more theory which contends that dividend policy is relevant for the value of the firm. Alternatively the dividend decision of the firm affects the value of the firm.

Assumptions:-

(i) No External Financing: - Gordon's model presumes that no external financing is available and retained earnings are the merely source of finance.

(ii) All-Equity Firm: - This model presumes that the firm is an all equity firm and it has absolutely no debt.

(iii) No Taxes: - Corporate taxes don't exist

(iv) Perpetual earnings: - it is presumed that the firm has perpetual life and their streams of earnings are also perpetual.

(v) Constant Internal Rate of Return: - An internal rate of return of the firm is presumed to be constant.

(vi) Constant Cost of Capital: - The cost of capital of the firm is presumed to be constant.

(vii) Constant Retention Ratio: - The retention ratio one time decided upon is constant.

(viii) Cost of capital in excess of growth rate: - It is presumed that the firm's cost of capital is greater than the growth rate.


Related Discussions:- Describes the gordons dividend model

Significance of secondary markets, Significance of Secondary Markets: H...

Significance of Secondary Markets: High liquidity and constant demand in the market need a diversified investor base with different preferences of demand, maturity and risk. Ap

What are the drawbacks of the payback, The drawbacks of the payback approac...

The drawbacks of the payback approach are as follows - Payback ignores the overall profitability of a project by ignoring post payback cash flows. In the illustration above the

Financial and economics evaluation, An offer given by charitable trust to d...

An offer given by charitable trust to develop and build a facility on a 10000 sqmt of plot in a prime locality of pune where 5000 sqmt of area will be used by the trust for housing

Benefit and drawback of maintaining many manufacturing sites, Discuss the b...

Discuss the benefits and drawbacks of maintaining multiple manufacturing sites like a hedge against exchange rate exposure. Answer:  To set up multiple manufacturing sites can

Functional silo, It is a phrase referring to the tendency of departments to...

It is a phrase referring to the tendency of departments to become isolated from one another in a functionally structured company.

Historical look at the treasury yield curve, The minimum interest rate ...

The minimum interest rate which investors demand for non-treasury securities is represented by the yield offered on the treasury securities. This is why market particip

Participants in secondary market, PARTICIPANTS IN THE SECONDARY MARKET ...

PARTICIPANTS IN THE SECONDARY MARKET The players in the secondary capital market include: Individual Investors (Public). Companies. Mutual funds. Financial Insti

Explain translation gain and losses handled in different way, How are trans...

How are translation gains and losses handled in a different way as per to the current rate method in comparison to the other three techniques, which is the current/noncurrent metho

Hurdles in implementation of securitization, The following are considered t...

The following are considered the major stumbling blocks: The process becomes expensive because of the stamp duty payable. It also

Floating-rate bonds, These were first issued during a period of extre...

These were first issued during a period of extreme interest rate volatility in the late 1970s. Floating-rate bonds, which are also known as variable-rate bonds or simpl

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd