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

Calculate, #questiBabar Corporation''s present capital structure, which is ...

#questiBabar Corporation''s present capital structure, which is also its target capital structure I, is 40% debt and 60% common equity. Next year''s net income is projected to be R

Premium, The amount by which the market price exceeds the conversion ...

The amount by which the market price exceeds the conversion value or the investment value called the premium. When expressed as a percentage, it is given by,

Current scenario of hedge fund industry, Global Scenario The Hedge Fund...

Global Scenario The Hedge Fund industry has captured over US $ 2 trillion in assets globally by the end of year 2006. According to an investor survey revealed for the Hedge Fun

Value of conversion benefits, Value of Conversion Benefits: Having seen...

Value of Conversion Benefits: Having seen the measure used to analyze the convertible bonds, let us now examine the merits and demerits of convertible bonds and why or why not

Break-even point, Break-Even Point The measure of products or services...

Break-Even Point The measure of products or services organizations must sell for its revenue from sales to equal its cost of production for the same number of units. Hence, se

Benefits of issue of securities, Benefits of Issue of Securities Initial...

Benefits of Issue of Securities Initial Public Offering (IPO) of securities gives instant recognition and visibility to the firm, helps to attract and retain skilled personnel,

Operating cycle, application of the operating cycle to a vegetable company

application of the operating cycle to a vegetable company

Rights of investors, Rights of Investors CERTIFICATES An investor ...

Rights of Investors CERTIFICATES An investor is entitled to receive shares/unit certificates allotted to him within a period of 6 weeks from the date of closure of the sub

HOW TO MANAGE FINANCES?, What are the strategies in managing your finances?...

What are the strategies in managing your finances? How it should be monitor?

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