According to the Gordon-Growth model, what will be the percentage change in the value of the stock of a company whose current dividend is $10.00 and whose dividends had been expected to grow by 3% per year but now are expected to grow by 1% per year?

Question

Quizplus · Accepted Answer

The Gordon-Growth model formula is P = D / (r - g). A decrease in the growth rate (g) from 3% to 1% will decrease the stock value. Calculating the percentage change in stock value using the formula shows a decrease of approximately 23.7%.

According to the Gordon-Growth Model, What Will Be the Percentage