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

Explain the meaning of ledger, Question 1 Write short notes on following- ...

Question 1 Write short notes on following- Explain any five important functions of accounting What is Book-Keeping? Explain features of book-keeping Question 2 Ex

Bond-equivalent yield, Normally, the cash flows from mortgage backed ...

Normally, the cash flows from mortgage backed and assets-backed securities are obtained on monthly basis. Therefore, the yield calculated would be on a monthly ba

Investment banker, The Role of Merchant Banker The issuer appoints the ...

The Role of Merchant Banker The issuer appoints the Merchant Banker (or Investment Banker) to undertake the issue activity. A Merchant Banker performs multiple functions during

Misconceptions of securitization, There are some misconceptions about...

There are some misconceptions about securitization: Poor quality originators end up in securitizing their assets. A bank's best mortgage

Illustrate the audit plans, Illustrate the audit plans Audit team must ...

Illustrate the audit plans Audit team must be sufficiently familiar and fully briefed by manager and have knowledge of the business or operation such that to be able to carry o

Transfer price, The price charged when one segment of an organization provi...

The price charged when one segment of an organization provides goods or services to another segment of the organization.

Limitation of weighted average cost of the capital, Q. Limitation of weight...

Q. Limitation of weighted average cost of the capital? 1) Determine the Weight; the first and foremost difficulty in computing the average cost is to an easy job. This type of

Define the covered arbitrage process and arbitrage profit, Assume that the ...

Assume that the current spot exchange rate is FF6.25/$ and the 3 month forward exchange rate is FF6.28/$. The 3 month interest rate is 5.6% per year in the U.S. and 8.8% per year i

What is business risk, What is Business risk It is related to response ...

What is Business risk It is related to response of the firm's earnings before taxes andinterest, or operating profits, to changes in sales. When cost of capital is used to eval

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