Chapter 8 - Master it!
In practice, the use of the
dividend discount model is refined from the method we presented in
the textbook. Many analysts will estimate the dividend for the next
5 years and then estimate a perpetual growth rate at some point in
the future, typically 10 years. Rather than have the dividend
growth fall dramatically from the fast growth period to the
perpetual growth period, linear interpolation is applied. That is,
the dividend growth is projected...