[Verse 1] Sarah owns stock in a company bright Dividends flowing like clockwork each year Growing at five percent, steady and right But what does equity cost? Let's make it clear Take the dividend coming, divide by the price Add the growth rate - that's your device [Chorus] Cost of equity, here's the key Dividend yield plus growth rate G D-one over P-zero today Plus the growth that's here to stay When dividends are stable and true This model works perfect for you [Verse 2] Microsoft pays two-fifty per share Stock price is hundred, so yield's two-point-five Growth rate is three percent - analysts declare Add them together, cost comes alive Five-point-five percent, that's what you need To satisfy each equity deed [Chorus] Cost of equity, here's the key Dividend yield plus growth rate G D-one over P-zero today Plus the growth that's here to stay When dividends are stable and true This model works perfect for you [Bridge] But beware when companies don't pay Or dividends jump around each day Young firms with earnings so wild This method gets easily beguiled Mature firms with steady cash Make this formula really flash [Verse 3] Constant growth is what we assume Dividends climbing at steady pace If that assumption fills the room Then discount model finds its place Required return crystal clear For investors holding shares dear [Chorus] Cost of equity, here's the key Dividend yield plus growth rate G D-one over P-zero today Plus the growth that's here to stay When dividends are stable and true This model works perfect for you [Outro] Gordon's growth model shows the way When dividends are here to stay
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