**📅 Date:** ➤ ⌈[[2025-05-11-Sun〚 DDM-Dividend Discount Model〛]]⌋ ⇩ 🅻🅸🅽🅺🆂 ⇩ **🗂 Menu**: ⌈[[✢ M O C ➣ 05 ⌈M A Y - 2 0 2 5⌉ ✢|2025 - M A Y- MOC]]⌋ ⌈[[✢ L O G ➢ 05 ⌈M A Y - 2 0 2 5⌉ ✢|2025 - M A Y - LOG]]⌋ #👾/Private ➤ ⌈[[💰028- Dividends – Background for the Dividend Discount Model (DDM)]]⌋ --- ![[IMG_0164.jpeg]] ![[IMG_0163.jpeg]] ## 🧠 Summary The **Dividend Discount Model (DDM)** is used to estimate the **intrinsic value** of a stock based on the **present value of its expected future dividends**. It is a fundamental valuation method in economics and finance. ![[Pasted image 20250606203706.png]] --- ## 🧮 Formula – Gordon Growth Model (Constant Growth) ``` P₀ = D₁ / (r - g) ``` **Where:** - `P₀`: Current intrinsic value of the stock - `D₁`: Dividend expected next year - `r`: Required rate of return - `g`: Constant dividend growth rate --- ## 🔑 Assumptions - The company pays dividends - Dividends grow at a constant rate (or a defined multi-stage pattern) - `r > g` in constant growth model - Best suited for stable, mature companies --- ## =📊 Key= Insight The DDM shows that a stock’s value is derived from **future dividend cash flows**, discounted to today’s value. It reflects the **time value of money** and is most effective for dividend-paying firms. ![[Screenshot 2025-06-06 at 20.42.16.png]]