Financial

Constant-growth model

Also called the Gordon-Shapiro model, an application of the dividend discount model that assumes (1) a fixed growth rate for future dividends, and (2) a single discount rate.

References in periodicals archive

In the constant-growth model, the estimated long-term growth rate of future income is subtracted from the required rate of return.

The terminal value is calculated by using the constant-growth model to capitalize year six income.

Discount and capitalization rates in business valuations

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