According to the Gordon-Growth model, what will be the percentage change in the value of a stock of a company whose current dividend is $10.00 and whose dividends had been expected to grow by 3% but now are expected to grow by 4% per year?

Question

Quizplus · Accepted Answer

The Gordon-Growth model calculates the value of a stock as D1 / (r - g), where D1 is the expected dividend, r is the required rate of return, and g is the growth rate. A change in the growth rate from 3% to 4% increases the stock's value by approximately 17.8%.

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