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How to estimate the DCF cost of equity if dividends are not growing at a constant...

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Finance

How to estimate the DCF cost of equityif dividends are not growing at a constant rate?(detailed explanation needed)

I found short answer on Internet for this as: "We will find thePV of the dividends during the nonconstant growth period and addthis value to the PV of the series of inflows when growth isassumed to become constant. " But I'm looking for adetailed explanation.

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3.9 Ratings (690 Votes)
One should estimate the DCF cost ofequity making use of CAPM if dividends are not growing at aconstant rateCapital asset pricing model CAPMreturnThis model is not new to us Enoughhas been discussed about this We simply state the equationThe general idea behind CAPM is thatinvestors need to be compensated in two ways the time value ofmoney and riskTime value of money The timevalue of money is represented by the riskfree    See Answer
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How to estimate the DCF cost of equityif dividends are not growing at a constant rate?(detailed explanation needed)I found short answer on Internet for this as: "We will find thePV of the dividends during the nonconstant growth period and addthis value to the PV of the series of inflows when growth isassumed to become constant. " But I'm looking for adetailed explanation.

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