Using equation (3.2),
A more refined approach is to estimate individual dividend payments for a few years and then assume a constant growth rate thereafter. For example, if d1, ..., dm +1 are the estimated annual dividend payments up to year m + 1 and g' is the constant growth rate of dividends thereafter:
where it has been assumed that the first dividend d1 is payable after exactly 1 year, and equation (3.2) has been applied after m years.
Was this article helpful?