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 main drivers for changing to ipsas, Question: PART A With th...

Question: PART A With the view to modernise its accounting system Government is considering adopting International Public Sector Accounting Standards (IPSAS) so as to maxim

Explain about cash forecasting method, Q. Explain about Cash Forecasting Me...

Q. Explain about Cash Forecasting Method ? Under this method an approximate is made of cash receipts and payments for the next period. Estimated cash receipts are added to the

Bonds with warrants, Bonds with Warrants: Warrants are usually attached...

Bonds with Warrants: Warrants are usually attached with the bonds or preference shares to attract the investor. The objective is to induce the potential investors to subscribe

Explain term financial intermediaries, Financial intermediaries Financi...

Financial intermediaries Financial intermediaries are significant to the efficient functioning of the financial markets as they act to bring the borrowers/companies and lenders

Increase total revenue, The Australian skiing industry operates out of a ve...

The Australian skiing industry operates out of a very narrow seasonal base-approximately three months in a good season. In a good year, providers of accommodation, ski hire and tow

FINANCIAL RISK MGT, DQ #1: Discuss the challenges of VaR approaches in valu...

DQ #1: Discuss the challenges of VaR approaches in valuing risk. How does portfolio risk assessment differ from a single asset’s risk assessment? How do managers typically load ba

How do flotation costs affect cost of raising that capital, When a company ...

When a company issues new securities, how do flotation costs affect the cost of raising that capital? When a company issues fresh securities flotation costs, enhance the cost o

Option-adjusted spread, The Option-Adjusted Spread (OAS) is a measu...

The Option-Adjusted Spread (OAS) is a measure of the yield spread (expressed in basis points) which can be used to convert differences between the values an

Debt finance, Ask queswtion #Minimum 100 words accepted# what are the chara...

Ask queswtion #Minimum 100 words accepted# what are the characteristics of debt finance? What are the similarities and differences between debt finance and ordinary share capital

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