The basic formula for the DGM is:
\[ P_0 = \frac{D_0 \times (1 + g)}{r - g} \]
where \( P_0 \) is the current stock price, \( D_0 \) is the most recent dividend paid, \( g \) is the growth rate of dividends, and \( r \) is the required rate of return.
Step 2:
Show more…