Question: The Gordon growth model value for X company was es…
The Gordon growth model value for X company was estimated as €22.18 based on:
- a current dividend of €0.68,
- an expected dividend growth rate of 6 percent, and
- a required return on equity of 9.25 percent.
What if the estimates of r and g can each vary by 25 basis points? How sensitive is the model value to changes in the estimates of r and g ?