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Gordon Growth Excel Model
  • Gordon Growth Excel Model
Originally published: 22/06/2016 08:25
Last version published: 02/02/2018 14:49
Publication number: ELQ-60016-2
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Gordon Growth Excel Model

An Excel Valuation Model to value the equity in a stable firm paying dividends, with stable growth

Prof. Aswath Damodaranby Prof. Aswath Damodaran
Professor at NYU Stern School of BusinessFollow 1,096
NYU Stern School of Businesswith NYU Stern School of Business
An Education in PossibleFollow 64
21 reviews960 views|Start the discussion!|Bookmark download for free
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Description
This Gordon Growth Excel Valuation model is designed to value the equity in a stable firm paying dividends, which are roughly equal to Free Cashflows to Equity.

The user has to define the following inputs to the model:
1. Current Earnings per share and Payout ratio (Dividends/Earnings)
2. Cost of Equity or Inputs to the CAPM (Beta, Riskfree rate, Risk Premium)
3. Expected Growth Rate in Earnings and dividends forever.

- Prof. Aswath Damodaran

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This Best Practice includes
1 Excel Model File

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Further information

This is the output from the Gordon Growth Model

- Current Dividends per share
- Cost of Equity
- Expected Growth rate

Best suited for firms growing at the same rate as the economy and paying residual cash as dividends.

Assumptions in the model:
1. The firm is in steady state and will grow at a stable rate forever.
2. The firm pays out what it can afford to in dividends, i.e., Dividends = FCFE.


4.6 / 5 (21 votes)

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