For not losing marks, do we need to explain what the V0 stands for in the exam?
V0 = D0 / (r – gl) × [(1 + gl) + N/2 × (gs – gl)]
Where:
V0 = intrinsic value
D0 = current dividend rate
gs = initial expected growth rate of dividends
gl = long-term expected growth rate of dividends
N = period of years for growth rate of dividends to decline from gs to gl
r = required rate of return for the stock market
Thank u.