GROWTH FIRMS, r > k NORMAL FIRMS, r = k DECLINING FIRMS, r < k

r 15% r 15% r
k 10% k 15% k
EPS 10 EPS 10 EPS

DPR = 0%
DIV 0 DIV 0 DIV
Po 150 Po 66.67 Po

DPR = 30%
DIV 3 DIV 3 DIV
Po 135 Po 66.67 Po

DPR = 50%
DIV 5 DIV 5 DIV
Po 125 Po 66.67 Po

DPR = 80%
DIV 8 DIV 8 DIV
Po 110 Po 66.67 Po

DPR = 100%
DIV 10 DIV 10 DIV
Po 100 Po 66.67 Po

DPR GF Column1 NF DF
0% 150 66.67 37.5
30% 135 66.67 41.25
50% 125 66.67 43.75
80% 110 66.67 47.5
100% 100 66.67 50
Column1 Opti DPR Column2
GF 0% LDPR
NF IDF
DF 100% HDPR
DECLINING FIRMS, r < k
15%
20%
10

0
37.50

3
41.25

5
43.75

8
47.50

10
50.00
 GROWTH FIRMS, r > k NORMAL FIRMS, r = k DECLINING FIRMS, r < k
r 15% r 15% r
k 10% k 15% k
EPS 10 EPS 10 EPS

b = 0, (1-b) or DPR = 100% br=0 & K>br br=0 & K>br

b 0.00% b 0 b
1-b 100% 1-b 100% 1-b
br 0% br 0 br
Po 100 Po 66.67 Po

b = 40%, (1-b) or DPR = 60% br=6%& K>br br=6%& K>br

b 40.00% b 40% b
1-b 60% 1-b 60% 1-b
br 6% br 0.06 br
Po 150 Po 66.67 Po

b = 60%, (1-b) or DPR = 40% br=9%& K>br br=9%& K>br

b 60.00% b 60% b
1-b 40% 1-b 40% 1-b
br 9% br 0.09 br
Po 400 Po 66.67 Po

SUMMARISE THE RESULTS

DPR GF NF DF
100% 100 66.67 50
60% 150 66.67 42.86
40% 400 66.67 36.36
Ideal DPR LDP IDF HDP
DECLINING FIRMS, r < k
15%
20%
10

br=0 & K>br

0
100%
0
50

br=6%& K>br
40%
60%
0.06
42.86

br=9%& K>br
60%
40%
0.09
36.36
r 30% EPS 103
DIV 43.5 b 58%
EPS 103 1-b 42%
k 15% WACC 20%
R 30%
P= 1083
P= 1664
WALTER GORDON